Alan Lakey, founder of CI Expert, is of the same mind: “Redundancy cover used to be offered by a number of traditional insurers, but they have pulled out of the market, leaving ASU plans to offer it as solitary cover, or as a package with accident and sickness cover.”
Steve Devine, chairman of the Protect Association, says: “Like Marmite, unemployment cover splits insurers into two camps: those who think it is uninsurable, and will not cover it, and those who think it is.”
Therefore, with choice being so limited, a combined ASU might be an appropriate option for some clients. Yet even if someone has IP but no unemployment cover, Mr Harvey claims there could be a ‘premium holiday’ to help keep someone covered even if they are currently unemployed.
He says: "Built into some IP policies are features such as premium holidays, which is effectively a waiver of premium in case of loss of job, allowing you to keep your cover if you're not working."
Mr Thukaram confirms Best Insurance has products offering a waiver of premium in the event of redundancy.
Ben Heffer, insight consultant, life and protection, for Defaqto, says while long-term income protection policies are better, they are not designed to protect people against redundancy, so he believes a “good combination” is to buy some IP and buy some unemployment cover separately.
“It’s worth asking if the life assurance company will offer unemployment cover alongside their long-term income protection plan, written by a general insurance company in their group," he adds.
For many providers, ASU is simple and straightforward, making it an appealing product to some people, especially those who have never taken out any form of insurance before.
Mr Devine points to an insurance product information document from PaymentCare, which provides a summary of what is covered, and what is not covered, by an ASU policy. The wording and conditions on the document are clear and simply presented.
It states: “You will receive the agreed monthly payment, subject to the limits of the cover, if the following conditions are met.” These are:
- You are made redundant (involuntary unemployment).
- You are unable to work due to an accident.
- You are unable to work due to sickness.
- If you are self-employed you will be insured if you have permanently ceased to trade due to circumstances entirely beyond your control.
- If you are a contract worker and you are made unemployed due to circumstances beyond your control you will be insured if you have been employed on a renewable fixed-term contract of at least 13 consecutive weeks with the same employer for more than two consecutive years or on an annual contract which has been renewed.
Disadvantages compared with IP policies
There are, however, some disadvantages to ASU, not least the fact it is cheap for a reason compared with IP policies: it doesn't go as far or for as long as IP cover.
1) IP is far more comprehensive
According to Mr Harvey, ASU “stacks up relatively poorly” against more comprehensive options such as IP, because of the limitations in the accident and sickness element already discussed.
“Another limitation of ASU cover is that while IP today is largely offered on an 'own occupation' basis, meaning that you're covered if anything medically prevents you from doing your specific job, certain ASU policies still only offer cover on a 'suited occupation' basis.”