Income Protection  

For whom is ASU suitable?

This article is part of
Guide to accident, sickness and unemployment insurance

For whom is ASU suitable?

Accident, sickness and unemployment cover might only be short-term and narrow in scope, but it can be a stepping-stone for people who have never considered any form of insurance before, or a safety net for those without savings. 

Jason Berry, director of sales for Uinsure, states: “ASU is essential for anyone who doesn’t have a financial security blanket to fall back on.”

With figures from Scottish Widows showing 21 per cent of Britons would not be able to cope if serious illness were to strike their household, it is important people consider a form of income protection (see Box Out).

Ben Heffer, insight consultant, life and protection, for Defaqto, elaborates: “Most people need some form of income protection because few people have sufficient savings to maintain their lifestyle for very long, should they be unable to work.

“On average, people in the UK only have sufficient savings to keep going for two to three months. Therefore, protecting your mortgage payments and/or a proportion of your income is a wise strategy.”

Mr Berry adds: “Essentially, people should ask themselves what they would do if they were unable to work for a prolonged period of time. Do they have the savings to fall back on? If not, and few people do, ASU is invaluable.”

As such, ASU can be a good product for those on a limited budget, people who have little financial knowledge and want a simple product, or for people who need particular cover at a particular point in time.

This is the view of Jennifer Gilchrist, protection proposition design specialist for Royal London, who comments: “People think protection cover is expensive but even for a small budget you can get some form of income protection.

“This not only provides a person with needed health support but also with financial support for a time thereafter. ASU can be good for this, as it covers sickness and unemployment together.

“Yes, it is limited, but it might suit someone’s budget and their needs at a specific time. It might also be a good starting-point for people getting financial advice.”

While Royal London does not offer ASU, Ms Gilchrist said she could understand why some people might think the ‘u’ bit is particularly important: “You never know what could happen any day – people could lose their job and the economic situation is uncertain.

“They may need the sort of breathing space that ASU can provide. Advice is key to them getting the right cover at the right time.”

Specific needs

Are there any specific circumstances in which ASU might be a stand-out choice for certain clients?

Rob Harvey, adviser at Drewberry, believes ASU might be a good fit for clients who do not have long-term liabilities, for example people without families, or who intend to rent for a short while.

He says: “We would caution against this for someone with a mortgage or a young family, because of the short payout length on the accident and sickness side of the policy.”