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Accident, sickness and unemployment insurance

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What is accident, sickness and unemployment insurance?

If you’re employed but unable to work, accident, sickness and unemployment (ASU) insurance is designed to cover a portion of your income while you get back on your feet.

ASU offers short-term income protection, offering pay-outs for up to 12 months if you make a claim. It means you can still cover your mortgage and other bills if you develop an illness or injury and can’t work.

When you buy ASU cover, you’ll need to decide how much income protection you want and then pay a monthly premium.

Accident and sickness insurance, and unemployment insurance, are available as standalone products, so it’s worth considering which of these you need.

If you’re an employee and are considering ASU, first check what your employer offers in terms of sick pay and redundancy packages, so you’re not buying insurance that you don’t need.

What do I need to get a quote?

Once you’ve chosen what type of income protection you need, we’ll need some details, including:

  • Your name, age and address
  • Whether you’re employed or self-employed
  • The type of job you do
  • Your income
  • How much cover you want, based on your monthly income
  • Whether you own or rent your home
  • Your deferred period (the maximum number of days you want to wait before the policy pays out)
  • If you smoke or use nicotine-based products.
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[1] Correct as of December 2023.

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What does accident, sickness and unemployment insurance include?

ASU can provide you with financial support if you:

  • Fall ill and are too sick to work for an extended period
  • Get injured and need to take time off work
  • Lose your job through no fault of your own.

What’s not covered by accident, sickness and unemployment insurance?

ASU cover generally won’t pay out if you:

  • Get sacked from your job, quit voluntarily or deliberately take out an ASU policy knowing you’re about to be made redundant
  • Have a pre-existing medical condition
  • Take time off work because of back problems, or stress and anxiety.

How does accident, sickness and unemployment cover work?

If your claim is successful, your insurance provider will pay you a tax-free percentage of your income, typically for up to 12 months. This is known as a monthly benefit amount and can help cover your outgoings.

Some ASU policies are directly linked to mortgage or loan repayments. Mortgage payment protection insurance and payment protection insurance are designed to cover your repayments on a specific debt, for example, a mortgage, loan or credit card.

Be aware that if you take out a policy and don’t make a claim, you won’t get your money back. And if you do make a claim, you’ll usually have to wait at least a month before receiving a pay-out.

Do I need accident, sickness and unemployment insurance?

ASU insurance is designed to provide you with peace of mind, knowing that you’ll be able to keep up with your financial commitments if you’re unable to work.

If you’re employed

If you have a job and are considering an ASU policy, first check what your employer offers in terms of sick pay and redundancy packages, so you’re not buying something you don’t need.

If you’re self-employed

If you’re self-employed you won’t have an employer to provide sick pay, so the accident and sickness elements of ASU insurance could be useful.

What about sick pay and redundancy pay?

You’re unlikely to need ASU cover if you have savings to fall back on, or work for a company that offers generous sick pay and redundancy packages. But if your employer pays only the statutory sick pay minimum – £109.40 for up to 28 weeks – and their redundancy packages are less than generous, you may want to consider ASU insurance.

As ASU insurance is only for the short term, another option is to take out long-term income protection. This will pay out until you return to work (however long it takes), retire or the policy ends. Premiums are more expensive though.

How much ASU cover do I need?

An ASU policy usually pays out a pre-tax portion of your salary. You can choose a percentage amount that represents your mortgage payment, or your total bills.

For example, if you had a pre-tax income of £2,500 a month and agreed a 50% ASU policy, you’d receive a monthly insurance payout of £1,250.

You should think about this carefully. Choosing a lower percentage will usually lower your premium, but you need to make sure you have enough cover in place to afford your monthly outgoings.

Our online journey allows you to cover up to 60% of your gross monthly income.

Can I get accident, sickness and unemployment insurance if I’m self-employed?

Yes, you can get unemployment, accident and sickness insurance for self-employed people. People who work for themselves may choose to take up some form of sick pay insurance, because they won’t get any sick pay from an employer, because they don’t have one (although they might qualify for state benefits).

What types of accident and sickness insurance are available?

There are two types of insurance for accident and sickness cover available to you:

Short-term cover – as the name implies, short-term accident and sickness protection covers your income for a set period if you get ill or injured and are unable to work. Depending on the policy, you should receive up to 70% of your income for a period of up to two years.

Long-term cover – long-term accident and sickness protection will cover your income right up until retirement age. This type of policy tends to kick in after your corporate sick pay stops. But given that it could be covering a long period of time, you’re likely to find that the premiums are expensive.

When can I claim on ASU insurance?

For an accident or sickness claim, you’ll usually need to have been signed off work, by a GP or other medical consultant. There will usually be a deferred period, before you can make a claim. You should check your policy wording for full details.

For unemployment cover, you may also have to be out of work for the duration of a deferred period. You may also be required to have signed up for Job Seeker’s Allowance (JSA). If you were self-employed, you’ll need to have de-registered your business with HMRC.

What other types of income protection are available?

There are several types of income protection insurance:

  • Standard income protection insurance — provides a replacement income if you’re unable to work because of illness or injury.
  • Critical illness cover — a type of life insurance that pays out in the event of serious illness or injury. However, it provides a one-off, tax-free payment, rather than an ongoing replacement income.
  • Mortgage payment protection insurance and payment protection insurance — designed to cover your repayments on a specific debt, for example a mortgage, loan, or credit card.

Frequently asked questions

How long will ASU pay out for?

ASU cover is designed to cover periods of temporary unemployment, sickness and injury. A typical policy will pay out for one to two years.

Long-term cover can last up to retirement age, but premiums will be more expensive.

Will my ASU pay out straight away?

ASU policies have a ‘minimum claim period’, which is typically 30 days. During this time, you won’t be eligible to make a claim. On top of this, there’s also an ‘excess period’, which you decide on.

That means, for example, if you buy a policy with a claim period of 30 days, choose an excess period of 60 days and make a successful claim, you’ll receive your first pay-out on day 91.

If your policy includes ‘back-to-day-one cover’, you’ll still need to wait for the claim period to end before making a claim, but there’ll be no excess period.

Is ASU the same as PPI?

PPI (payment protection insurance) typically comes with a loan or credit card. It can help if you’re unable to make a payment.

PPI is designed to cover payments for specific debts, while ASU provides a replacement for your wages. With this alternative income, you can hopefully maintain your regular outgoings, not just individual payments.

Does ASU cover illness?

ASU can cover loss of earnings through illness or injury. Statutory sick pay is likely to be much lower than your earnings, so accident and sickness insurance can help bridge that gap.

Short-term sickness insurance usually covers periods of up to 12 months. Long-term sickness insurance is more expensive, but it’s designed to pay out for a minimum of two years and a maximum of up until your retirement age.

Depending on your health, it’s important to consider which cover is right for you.

How does ASU insurance affect my sick pay?

ASU insurance doesn’t affect your sick pay. It's there to help cover your expenses when your sick pay ends.

Sick pay varies, depending on where you work. Some employers will give you your full salary for a certain time period while you’re ill, with some packages paying you for up to 12 months.

Otherwise, you could qualify for Statutory Sick Pay (SSP) for up to 28 weeks.

Before buying any insurance, check what your employer will pay you and for how long. That’s because it will affect your deferred period – the length of time you have to wait before your pay-outs kick in.

If you’re self-employed, you won’t receive sick pay, so you may want to consider some type of sick pay insurance.

What is income protection insurance?

Income protection insurance is a policy that can cover you if you’re unable to work because of illness or injury.

Income protection insurance could give you a tax-free income – and it might continue to pay out until you can go back to work or retire.

Can I get insurance for redundancy?

If you lose your job, redundancy insurance is one way to secure a regular income to replace your lost wages. After a deferral period, you’ll receive a tax-free income to cover your monthly outgoings. Payments typically last for up to a year.

More comprehensive accident, sickness and unemployment insurance plans also cover redundancy.

It’s worth remembering that ASU won’t cover you if you take voluntary redundancy, and it won’t pay out if you’re fired for misconduct.

Does ASU cover mortgage payments?

You can use ASU pay-outs however you want. You can also get mortgage payment protection insurance that covers your mortgage repayments if you get sick or lose your job through no fault of your own.

What is a deferred period?

A deferred period is a fixed period of time that has to pass before your monthly pay-outs begin. During this time, you might use your savings or company sick pay to cover your expenses.

You can choose the deferred period yourself, depending on your needs. The longer the deferred period, the cheaper your premiums are likely to be.

Will I be accepted for sickness insurance?

This will come down to your personal circumstances and the insurance provider. If you’re over 65 or have been in your current job for less than six months, you might find it difficult to get ASU cover.

And while you might find a provider that guarantees acceptance, this doesn’t necessarily mean their policy is the right option for you.

Each insurance provider will judge risk in their own way, meaning that you’ll get different quotes from different providers. Always read your policy carefully to make sure you have cover that best suits your needs.

How can I compare accident, sickness and unemployment protection polices?

Our comparison service makes it easy. Just give us a few details and decide what you want covered: your mortgage payments or your income.Then choose the kind of cover you want: accident and sickness, or accident, sickness and unemployment.

We’ll list your quotes in price order, starting with the cheapest at the top. But don’t make your decision based on price alone. Read what each policy covers to make sure you get cover that’s right for you.

Author image Mubina Pirmohamed

What our expert says...

"When choosing an accident, sickness and unemployment policy, bear in mind that you may not need the maximum amount of cover available to you. This can help reduce the cost of your premiums. The amount you choose should be enough to cover essential outgoings, like your mortgage, food and other bills."

- Mubina Pirmohamed, Insurance expert

Page last reviewed on 19 JANUARY 2024
by Anna McEntee