We never know what life has in store for us. We hope that everything goes our way, but we can’t guarantee it. What can be guaranteed is that the bills keep coming in even if our income doesn’t.
Putting food on the table and a roof over it is expensive and could become impossible if a serious illness, accident or job loss were to stop us working. State benefits exist, but the sums involved and the help they provide is limited.
Accident, Sickness and Unemployment cover, also known as ASU, is a type of insurance designed to replace a lost income. It is an insurance policy that pays you a tax-free proportion of your lost salary every month for a period of time over 12 or 24 months if you are unable to work due to illness, injury or redundancy. It can help you cover your financial commitments such as mortgage, rent, bills or loan repayments until you are fit enough to return to work, or until you find a new job.
Short-term policies can pay out up to 70% of your income every month for a limited period – usually up to two years. You can claim multiple times on your policy as long as you continue paying your premiums.
Long-term policies have no limit to your claim period, so you can continue receiving monthly benefits from your policy until you reach retirement age. However, long-term cover usually excludes cover for unemployment.
ASU pays you a tax-free proportion of your lost salary every month until you’re back on your feet. A typical policy can cover 50% to 70% of your monthly income, based on your salary or your gross annual earnings.
After stopping work, you will need to wait out a set period before you begin receiving ASU benefits. This can be set to match any sick pay you may have. Setting longer periods can save you money on your premiums.
Self-employed individuals may not qualify for unemployment cover under an ASU policy, so they should consider accident and sickness only cover.
Other types of income protection include Payment Protection Insurance (PPI) which will cover the repayments for outstanding loans if you stop earning. The pay-outs usually go directly to your lender.
Mortgage PPI will cover your mortgage payments if you can’t work. Some policies continue to pay out until your mortgage is paid off. Mortgage PPI pay-outs usually go to the policyholder.
If you can’t count on a generous sick pay or redundancy package from your employer, ASU can provide valuable peace of mind. It can be even more important if you are self-employed or run a small business where the income depends on you and your hard work.
We recommend that our clients get expert help from an Independent Financial Adviser (IFA). They can help you look at your options for ASU cover.
If you haven’t got an IFA then please talk to us or see: [Finding an adviser | FCA](https://www.fca.org.uk/consumers/finding-adviser)