The number of Britons buying accident, sickness and unemployment insurance has soared in recent months as workers seek to protect their income against illness and job losses.
Concerns about the economy and the fallout from the Covid pandemic have led to a 110 percent increase in sales in the first three months of 2022 compared to a year earlier, according to data from insurance broker Assured Futures.
After layoff rates hit record levels in 2020, it is perhaps not surprising that workers are looking to effectively secure a portion of their wages, should they be out of work for a period of time.
Contingency: Accident, sickness, and unemployment insurance can cover part of a salary if the policyholder is unable to work or loses their job through no fault of their own.
Sales are also said to be increasing because more new policies are available, after many were withdrawn during the pandemic.
This recent rise comes despite premiums being higher than before the pandemic, averaging between 75p and £10 a day. That equates to between £274 and £3,650 per year.
This is Money explains exactly what accident, sickness and unemployment insurance is, what is covered and who is eligible.
What is accident, sickness and unemployment insurance?
Accident, sickness and unemployment insurance is a type of income protection to cover you financially during times when you may not be able to work.
This includes absences due to illness or injury, layoff, or loss of a job through no fault of your own.
The coverage works in general terms in the same way as auto or home insurance. The policyholder will pay a fixed monthly premium, and if he has to stop working he will receive a monthly payment that reflects a certain proportion of his usual salary.
While policies can vary, clients would generally agree to a 12-month policy that would protect up to 70 percent of their current income.
In the unfortunate event that you need to claim, the policy would pay out over 12 to 24 months, which would hopefully be enough to help you find another job or recover from an accident or short-term illness.
It is worth noting that accident, sickness and unemployment insurance is slightly different from other forms of unemployment insurance.
Other forms of income protection are designed to cover a specific bill, such as a mortgage. In contrast, Accident, Sickness and Unemployment insurance works by paying a percentage of income directly to the policyholder to help cover all of their expenses.
Who is eligible for ASU coverage?
Since the pandemic, eligibility has become quite restricted in some cases.
To purchase Accident, Sickness and Unemployment cover, clients must be between 18 and 65 years of age, a UK resident or taxpayer and currently working at least 16 hours a week.
Insurers will also take into account how long they have been employed in their current role. To benefit, they must have been permanently employed in a job for the minimum period specified by the policy, usually 12 months.
The applicant will also need to answer some detailed questions about their work, health, leisure activities, and medical history, which can affect the premium they pay and limit their options.
Any accident, illness and unemployment insurance policy will not be valid if it is contracted when the holder already knows that he is at risk of dismissal.
Some occupations are also not covered by this type of policy, so be sure to check with a broker or insurer of your choice to see if you’re eligible.
It is possible to get coverage if you are self-employed, although premiums are likely to be higher.
What do ASU insurance policies not cover?
Accident, Sickness and Unemployment policies only protect against a limited set of circumstances and unfortunately there is a much longer list of things they won’t cover.
The policies cover you in the event of involuntary dismissal, paying up to 70 percent of your total earnings.
Generally, the policies will not cover voluntary termination or cases where people are fired for misconduct or dismissal. They will also not be covered if they leave their job by personal choice, or if they become ill due to a pre-existing condition they had before taking out the policy.
Coverage usually has a waiting period, which is a set period of time between the policyholder and the insurance company for when they can file a claim. This typically lasts for the first six months of a policy.
Policies also tend not to cover illnesses due to Covid-19, although they do sometimes offer coverage if the policyholder is ill for a long period of time or suffers from prolonged Covid-19.
It is vital to read the terms and conditions to see what specifically you are covered against.
Who should take out protection insurance?
According to the Office for National Statistics, levels of redundancy in the UK were the highest since records began between September and November 2020.
The Covid-19 pandemic highlighted the risk of being laid off for many, and those who want to be protected in the future may want to consider accident, sickness and unemployment policies.
Meanwhile, recent research from Shawbrook Bank estimated that 16 million people in the UK had less than £100 in savings, while one in five said they hoped to dip into their savings to cover basic costs in the near future. .
ONS data shows how redundancy levels spiked to record levels in 2020 due to Covid-19
This potentially leaves millions without a safety net if they find themselves out of work or with an illness that leaves them unable to work.
The Jobseeker’s Allowance is currently set at up to £77 a week for those over 25, which is unlikely to cover many people’s expenses if they are unable to work for a period of time.
Ian Sawyer, chief commercial officer at Assured Futures, said: “As a result of the pandemic, many people are more concerned about being laid off than before.
“Now that furlough schemes have ended, people are beginning to realize that they need to protect themselves where possible, which is why products that offer unemployment protection have never been more important.
Shawbrook Bank has suggested that 16 million people in the UK have less than £100 in savings, leaving them at serious financial risk if they lose their job or fall seriously ill.
“Considering the rising cost of premiums, and the fact that many consumers are unaware that ASU is back, this increase in sales is a really positive sign for the industry and consumers.
“Given the clear demand for this type of coverage, we expect more providers to enter the market, which should make premiums more competitive.”
Of course, not everyone will be able to afford the added expense of unemployment insurance, especially those who are already struggling.
Sally Conway, Shawbrook’s head of consumer communications, suggested that anyone with financial concerns should contact their bank and debt charities.
‘If you are struggling in the current climate and concerned about the continued impact, it is a good idea to speak up about your situation. Talk to your bank and find out how they can support you,” he said.
“Although talking to friends and family is a great way to deal with the emotional impact, it may be helpful to contact a free financial advice service, such as Citizens Advice, for additional guidance.
‘Not only can they offer budget tips and advice, but they can also help you manage any debt.
“Our research shows that people are already turning to these services, as well as reviewing budgets, and if you find yourself in a similar position, reach out for help.”
Four in five Britons reported feeling uncertain about the future state of the UK economy, in a sign that financial anxiety is rising in the wake of the Covid pandemic and rising cost of living.
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