Understanding ASU insurance

Accident, sickness and unemployment (ASU) insurance provides financial protection if you are unable to work as a result of an accident or ill health, or in the event that you become unemployed through no fault of your own.

There are many different ASU policies available, including payment protection insurance (PPI), and mortgage payment protection insurance (MPPI).

Why should I take out ASU cover?

If you lost your job or couldn't work as a result of ill health, could you keep up your mortgage repayments and other financial outgoings?

Without substantial savings, most of us would struggle to do so. ASU policies exist to give people peace of mind that they could manage financially in an emergency.

Before applying for cover, you should check whether or not your employer provides any similar protection. For example, some firms will pay staff who are off work through ill health for a longer period than the statutory minimum.

What does ASU insurance pay out for?

ASU policies usually can only be claimed on for a maximum of one or two years. They can either be used to pay mortgage payments or loan payments, or general bills.

For example, a payment protection insurance (PPI) policy, which is a form of accident, sickness and unemployment cover, usually simply meets the cost of a specific debt, preventing you from defaulting. If you claim on the policy it is still your responsibility to pay the debt as the insurer will pay you directly.
 
Similarly, mortgage payment protection insurance (MPPI) would usually be paid out to you directly. You would then be responsible for meeting your mortgage payments. 

Mortgage payment protection insurance (MPPI) is taken to cover your mortgage repayments and can usually cover an amount over and above the actual payments to your lender for associated bills, etc. usually around 25% extra.

How long will your ASU policy last?

Unfortunately, this type of insurance policy won't pay out indefinitely, so when you are comparing ASU insurance, make sure you're clear about any restrictions.

Most policies will only continue to meet your costs for a fixed period, often between three months and two years. The longer the cover is provided for, the more expensive it will usually be.

It is also worth being aware that many ASU insurance policies will not kick in until you have been off work for a fixed period, normally  at least a month

Some ASU policies allow you to determine how long you will wait before the payments start. Usually, the longer you agree to go before receiving payment, the cheaper the policy will be. That means it's worth factoring in any long-term support your employer might agree to provide, in case it allows you to reduce the price of your policy.

Of course, it's not a good idea to bring down the cost of insurance by setting an unrealistic wait period.

Because you're likely to have to wait for your ASU payment, it is a good idea to have some additional savings in place as well as your policy, so that you don't find yourself floundering financially in the first few months before the cover kicks in. If in doubt, you could always consider a 'Back to Day 1' policy. This is where, so long as you are off for at least 31 days the payment would be made all the way back to the first day you were off.

What are the alternatives to ASU insurance?

ASU insurance can be a really useful protection and give you time to recover from accidents or certain illnesses.

However, if you became ill and were unable to return to work at all, then this kind of short-term cover might not give you the peace of mind you want.

In that case, income protection, or critical illness cover could be a better or additional option for you. Income protection will pay you a monthly sum in the event that you cannot work due to illness or accident until you recover or retire, while critical illness cover will pay out a lump sum in the event that you suffer from a serious illness, such as certain cancers or a severe heart attack for example.