The Benefits and Risks of Accident, Sickness and Unemployment Cover

• A low cost way of protecting your income over a limited time period
• You have flexibility in determining the amount you pay each month for the insurance by selecting your own personal combination of the sum assured and deferment period.
• You can choose different levels of insurance: Accident and Sickness Only, Unemployment Only or Accident, Sickness and Unemployment Cover
• It can be a viable option for Income Protection if you have been declined for long-term Income Protection due to your medical history

An Accident, Sickness and Unemployment policy can provide a vital replacement of your income if you are incapable of working or are made involuntarily unemployed. The policy can provide some financial relief so that you know you can make your mortgage payments, pay loans and continue your standard of living until you are able to return to work or secure new employment.

Here is a quick breakdown of the things that you will come across when looking at this type of policy:

Accident, Sickness and Unemployment policies are notoriously complex and it can be a minefield trying to determine eligibility for cover. It can be very easy to over-insure yourself and we highly recommend that you speak with a financial adviser who is familiar with these policies before you apply for cover.

Main points that you should consider:

1. Do not over-insure yourself

There is no point in paying for a higher policy benefit than you are eligible for. At the point that you make a claim the insurer will want to see evidence of your recent income and they will cap the amount of benefit that you receive to their set guidelines, regardless if you have been paying a higher premium for a higher sum assured.

2. Make sure that you are eligible for the policy

Some Accident, Sickness and Unemployment policies are dependant upon you being personally named on a mortgage, rental agreement or relevant commitments. If you are not named on one of these and take out a policy based upon this premise, you will be unable to place a claim.

In addition to this some insurers will not support a claim if you spend a certain amount of time abroad due to work. This should be detailed within your policy documentation.

It is very important that you inform the insurer of any changes in your circumstances that could affect your eligibility for the policy:

• Occupation
• Employment status – self-employed, employed, director
• Second occupation
• Working hours
• Travel abroad
• Reduction in salary meaning that you become over-insured
• Increase in salary meaning that you may be eligible for a higher sum assured
• Long-term group Income Protection through your employer

If you do not inform the insurer of any changes that could affect your ability to claim on the policy you may find that you will not be able to place a claim. It is your responsibility to inform the insurer of these changes.

3. Read the small print when transferring cover

If you already have an Accident, Sickness and Unemployment policy in place and see the same, or better, cover level cheaper elsewhere check that the new cover offers you the same policy benefits as the original. Also make sure that the new insurer allows a transfer of cover or the initial exclusion period before you are fully covered for unemployment insurance will restart.

4. Where you live can matter

Not that we agree with this, but some insurers will alter the price of a policy dependent upon your postcode.

5. Medical history will not affect your application

Your medical history will normally have no impact upon the pricing of your policy, everyone is accepted for these types of policies without medical underwriting; this also means with many plans that your smoker status does not affect the policy premium. Whilst this is the case you should be fully aware that any claim that you place will typically exclude any pre-existing medical conditions. For example, if you are diabetic your application for Accident, Sickness and Unemployment Cover will be accepted at standard terms. If you then place a sickness claim for diabetes or any related condition the policy will not payout. However if you place a claim for incapacity due to an unrelated condition such as cancer, you should receive a payout. Your existing condition should not affect your ability to claim on the unemployment aspect of the policy.

6.Garden leave, payment in lieu and voluntary redundancy

All of these can have an impact upon your ability to place a claim on your policy. Garden leave and payment in lieu may result in your policy paying out a claim later than the date that you physically stop working for your employer, as the insurer will assess your claim on the date that you actually cease working for the employer.

7. Consider your existing policies and employment benefits

To make sure that you do not over-insure yourself you need to ensure that any Accident and Sickness policy will pay alongside any existing Income Protection policies or employment benefits that you have in place.

8. Dont wait until it is too late!

There are a number of industries where Accident, Sickness and Unemployment cover is not available due to the volatility of the employment market. When you take out one of these policies there is an initial exclusion period that the policy must be live for before you can be considered for unemployment benefit; this can be up to 120 days. So, if you take the example where you purchase the policy 1 February and your employer enters a consultation period for redundancies on the 30 June, the policy will become void. There are some policies that offer an exclusion period as low as 60 days on the initial exclusion period. It is knowing which insurer to approach with your individual circumstances that makes the role of an insurance adviser so helpful!

How much can this cost?

The cost of an Accident, Sickness and Unemployment policy will depend upon a number of factors including your age, the sum assured, claim term and exclusion period.

A 30 year old office worker wanting to insure £1,500 a month that will pay for a maximum of 12 months with a deferment period of 30 days standard, may see the following policy premiums available to them**:

The cost of Accident, Sickness and Unemployment policies is the same whether you use an insurance advisor or go directly to the insurer yourself. It is worthwhile to use an advisor who is well versed in this type of policy when placing your cover, as they will be able to choose the correct insurer and policy combination relevant to your needs.

If you are interested in an Accident, Sickness and Unemployment policy please feel free to request a quotation from us to see what types of policy are available to you. Alternatively please call one of our industry trained insurers on 0800 567 7450 who can advise you on the products and your choices more thoroughly.

*The maximum amount of sum assured varies depending upon the insurance provider you place your application with.
**Policy premiums true to research conduction on 28 January 2016.