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Accident, sickness and unemployment insurance

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What is accident, sickness and unemployment insurance?

Accident, sickness and unemployment (ASU) insurance is designed to cover a portion of your income if you can’t work because of illness, injury or compulsory redundancy.

ASU is a type of short-term income protection, typically offering payouts for up to 12 months if you make a claim. It means you can still cover your mortgage and other bills if you’re ill or injured and can’t work.

Accident and sickness insurance, and unemployment insurance, are available as standalone products, so it’s worth considering whether you need all these in one bundle.

You should also check what your employer offers in terms of sick pay and redundancy packages, so you’re not buying insurance you don’t need.

What does accident, sickness and unemployment insurance cover?

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
  • Are made redundant
  • Lose your job through no fault of your own.

What isn’t 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
  • Try to claim for a pre-existing medical condition
  • Take time off work because of self-inflicted injury or reckless behaviour
  • Make a claim during the deferred or waiting period of the policy.

Certain occupations might not be covered, and some policies won’t cover common work-related conditions like back pain and stress. Check your policy for the full list of exclusions.

Author image Tim Knighton

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."

- Tim Knighton, Life, health and income protection insurance expert

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.

Do I need ASU 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.

While you may be fit and healthy at the moment, and in a secure job, it’s impossible to predict what the future will hold. According to figures released in April 2024 by the Office for National Statistics, there were 3.9 redundancies for every 1,000 employees in a three-month period in the UK.

If you unexpectedly found yourself out of work, would you be able to rely on your savings to cover your bills? And for how long?

ASU insurance is designed to provide you with reassurance that you’ll be able to keep up with your financial commitments until you recover, retrain or find a new job.

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 personal 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 – £116.75 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.

Am I eligible for ASU cover?

To be eligible for accident, sickness and unemployment cover, you’ll typically need to be:

  • Aged between 16 and 65
  • In full-time or part-time employment
  • A UK resident and taxpayer with legal right to work in the UK
  • Be employed in the same job for at least the last 12 months
  • Meet the minimum hours of employment as stated in your policy, typically 15 hours a week
  • Be registered with a UK doctor.

When you apply, you may also have to answer some questions about your job, lifestyle and medical history.

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.

Think carefully about how much cover you need. Choosing a lower percentage will usually decrease your premium, but you need to make sure you have enough cover in place to afford your monthly outgoings.

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

Accident and sickness insurance for the self-employed

If you work for yourself, you could choose to take out a standalone ASU policy because you won’t get any sick pay from an employer. You also won’t get statutory sick pay, although you may qualify for other state benefits to help with living costs.

Monthly payouts for self-employed income protection can be determined by gross annual earnings rather than a monthly salary.

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 – covers your income for a set period if you become ill or are injured and are unable to work. Depending on the policy, you could 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?

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

To claim unemployment cover, you may also have to be out of work for the duration of a deferred period. You may also need to have signed up for Jobseeker’s Allowance (JSA).

What other types of income protection are available?

There are other types of insurance designed to help cover your outgoings. These include:

  • 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 if you have a serious injury or illness covered by the policy. 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.

What do I need to get an ASU policy quote?

Once you’ve chosen the type of income protection to suit you best, we 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 June 2024.

[2] As of July 1st 2024, Compare the Market had an average rating of 4.8 out of 5 from 43,115 people who left a review on Trustpilot. The score 4.8 corresponds to the Star Label ‘Excellent’.

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 12 months.

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

Will my ASU pay out straight away?

No, ASU policies have a waiting period at the start of the policy before you can claim – typically 30 days. On top of this, there’s also a deferred period, which you decide on.

That means, for example, if you buy a policy with a waiting period of 30 days, choose a deferred period of 60 days and make a successful claim, you’ll receive your first payout on day 91.

If your policy offers ‘back-to-day-one cover’ there’ll be no voluntary deferred period.

Is ASU the same as PPI?

ASU offers a replacement for a percentage of your wages, to allow you to maintain your regular outgoings.

PPI (payment protection insurance) is designed to cover payments for specific debts, like a loan or credit card.

Does ASU cover illness?

Yes, ASU can cover loss of earnings through illness or injury. But it usually only covers periods of up to 12 months, even if you’re unable to work after this time.

Income protection insurance is more expensive, but it’s designed to pay out until you can go back to work or you retire.

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. But your sick pay can affect the length of time you choose to wait before your ASU payouts kick in.

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. Others may only pay statutory sick pay for up to 28 weeks.

Is income protection the same as ASU insurance?

ASU is a type of income protection. It’s sometimes known as short-term income protection and is designed to cover temporary periods of unemployment, illness or injury.

Traditional income protection policies typically pay out over the long term or until you retire. However, they typically have longer deferred periods, premiums are more expensive, and they won’t cover redundancy.

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 deferred period, you’ll receive a tax-free income to cover your monthly outgoings. Payments typically last for up to a year.

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.

You can’t compare standalone polices for redundancy insurance at Compare the Market. But you can compare quotes for different types of income protection insurance, which include unemployment cover.

Does ASU cover mortgage payments?

You can use ASU payouts however you like so, yes, you could use the money to cover your mortgage payments.

Alternatively, you could take out mortgage payment protection insurance (MPPI). It could cover your mortgage repayments if you become ill 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?

Whether you’ll be accepted for ASU insurance depends on 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.

Each insurance provider will judge risk in their own way, meaning 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, provided by our trusted partners Howden Life & Health, makes it easy to compare ASU insurance.

Just give us a few details, 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. Look for a policy that’s right for you.

Page last reviewed on 26 JUNE 2024
by Tim Knighton