What are the features of ASU and how does it work?
Accident, sickness and unemployment (ASU) cover pretty much does what it says on the tin: provides some level of protection in the event of an accident, being off work due to sickness and in the event of forced redundancy.
ASU falls under a general insurance category known as Creditor Insurance, but it should not be confused with traditional payment protection insurance policies, which only cover people for one financial commitment, such as a loan or mortgage repayment.
ASU can also be called short-term income protection insurance (STIP) or mortgage payment protection insurance (MPPI).
Ben Heffer, insight consultant, life and protection for Defaqto, comments that with MPPI, the level of benefit is defined by the amount of one’s mortgage payments, plus an additional amount to cover mortgage-related outgoings, such as building and contents insurance premiums.
With STIP, the benefit is defined as a percentage of an individual’s income, up to a maximum of typically 65 per cent of gross income.
There is some flexibility over the scope and features of ASU, according to Steve Devine, chairman of the Protect Association. He says people can choose between:
- Accident and sickness policy.
- Accident, sickness and unemployment.
- Unemployment only.
Individuals can buy unemployment cover by itself, not just packaged within an ASU policy, and it pays out in the event of forced redundancy for a maximum of one year.
An obvious caveat is the cover applies only if the client loses the job through no fault of their own; it will not cover them if they just leave their job and do not have another one to go to, for example.
Mr Devine states that full ASU “covers accidents, short and/or long-term illnesses, redundancy and involuntary unemployment, but excludes pre-existing conditions, most back and stress-related conditions, misconduct or voluntary redundancy.
“You can choose which is best for you. For example, a client’s employer might provide great sick pay, so the individual may only be concerned with unemployment insurance.”
Zurich UK does not offer ASU but, as Peter Hamilton, head of market management for Zurich UK Life says, the key focus with ASU is “what people are trying to protect against: the financial implications of sickness, injury or unemployment, and how best to do that.
“An ASU plan will look to bring these together, but there are limitations as they are often short-term, renewable contracts with little certainty about ongoing availability of cover.”
However, he acknowledges that the simplicity and relative low cost of ASU is an important factor for many individuals and their advisers.
Mr Hamilton comments: “These are relatively simple, and may appeal to those where cost is a real issue in terms of cover.”