The number of Britons taking out accident, sickness and unemployment insurance has skyrocketed in recent months as workers seek to protect their incomes from illness and job loss.
Worries about the economy and the consequences of the Covid pandemic led to a 110% increase in sales in the first three months of 2022 compared to the previous year, according to data from insurance broker Assured Futures.
After layoff rates hit record highs in 2020, it’s perhaps unsurprising that workers are looking to effectively insure part of their wages, in case they’re out of work for a while.
Contingency: Accident, sickness and unemployment insurance can cover part of a salary if the policyholder is unable to work or loses his job through no fault of his own
Sales are also said to be increasing because more new fonts are becoming available, after many were retired during the pandemic.
This recent spike comes despite higher premiums than they were before the pandemic, averaging between 75p and £10 a day. This 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 that covers you financially when you cannot work.
This includes absences due to illness or injury, layoff or loss of employment through no fault of your own.
Coverage basically works the same way as car or home insurance. The insured will pay a fixed monthly premium and, if he has to stop working, he will receive a monthly indemnity corresponding to a certain proportion of his usual salary.
Although policies may vary, clients generally agree to a 12-month policy that would protect up to 70% of their current income.
In the unfortunate event that you need to claim, the policy will be paid out over a period of 12-24 months, which will hopefully be long enough to help you find another job or recover from an accident. or a short-term illness.
It should be noted 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 insured 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, customers must be between the ages of 18 and 65, be UK residents or taxpayers and currently work at least 16 hours a week.
Insurers will also consider how long they have been employed in their current role. To qualify, they must have been a permanent employee in a job for the minimum period specified by the policy, usually 12 months.
The applicant will also need to answer detailed questions about their work, health, leisure activities and medical history, which may affect the premium they pay and limit their options.
Any insurance policy against accident, sickness and unemployment will not be valid if it is taken out when the holder already knows that he is at risk of being made redundant.
Certain professions are also not covered by this type of policy, so be sure to check with a broker or your chosen insurer to see if you are 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 insurance policies only protect against a limited set of circumstances and unfortunately there is a much longer list of things they will not cover.
The policies cover you in the event of involuntary dismissal and reimburse you for up to 70% of your overall income.
Policies will generally not cover voluntary departures or cases where people are terminated for misconduct or terminated. They also won’t be covered if they quit their job by personal choice or if they become ill from a pre-existing condition they had before taking out the policy.
Coverage usually has a waiting period, which is a fixed amount of time determined between the policyholder and the insurance company for when they would be able to make a claim. This usually lasts for the first six months of a policy.
Policies also don’t tend to cover illnesses due to Covid-19, although they will sometimes offer cover if a policyholder is ill for an extended period or suffers from long Covid.
It is essential to read the terms and conditions to see what you are specifically covered against.
Who should take out protection insurance?
According to the Office of National Statistics, levels of redundancy in the UK were the highest since records began between September and November 2020.
The Covid-19 pandemic has highlighted the risk of being made redundant 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 expected to draw in their savings to cover basic costs in the near future.
ONS data shows how redundancy levels hit record highs in 2020 due to Covid-19
This potentially leaves millions of people without a safety net if they find themselves out of work or with an illness that prevents them from working.
Jobseeker’s Allowance is currently set at £77 a week for over-25s, which is unlikely to cover many people’s expenses if they are unable to work for a period of time.
Ian Sawyer, Commercial Director at Assured Futures, said: “Due to the pandemic, many people are more worried than before about being made redundant.
“Now that furlough schemes are over, people are starting to realize that they need to protect themselves where possible, so 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, putting them at serious financial risk if they were to lose their jobs or fall seriously ill.
“Given the rising cost of premiums – and the fact that many consumers are unaware of the return of ASU – this surge in sales is a really positive sign for the industry and consumers.
“Given the clear demand for this type of cover, we expect to see more providers entering the market, which should then make premiums more competitive.”
Of course, not everyone will be able to afford the extra expenses of unemployment insurance, especially those who are already struggling.
Sally Conway, consumer communications manager at Shawbrook, suggested anyone with financial problems should contact their bank and charities.
“If you are struggling in the current climate and are worried 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 help you,” she said.
“While talking with friends and family is a great way to deal with the emotional impact, it might be worth contacting a free financial advice service, such as Citizens Advice, for further advice.
“Not only can they offer advice and tips on budgeting, but they can also help you manage any debt.”
“Our research shows that people are already turning to these services, as well as budget reviews, and if you are in a similar position, please seek help.”
Four in five Britons said they were unsure about the future state of the UK economy, a sign that financial anxiety is on the rise following the Covid pandemic and the soaring cost of living.
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