Find out more about accident, sickness and unemployment insurance, to see how you could insure your income against the unexpected.
When it comes to protecting ourselves against the unexpected, most of us have probably purchased insurance at some point in our lives, or at least thought about doing so.
We insure our homes and cars, our holidays, and our much-loved family pets, but for some reason, our income often gets forgotten about.
If you’ve never considered income protection insurance before, ask yourself one question: how would you support yourself if you lost your job, or were unable to work because of an accident, injury or illness?
In an ideal world, being without a regular income isn’t something we would have to worry about, but it’s impossible to predict what’s around the corner.
If you’ve been in the same job for a number of years, and have never been affected by redundancy or needed to take time off to recover from an injury or illness, you might not be sure whether you need income protection.
However, in these increasingly uncertain times, job security is no longer a guarantee. According to recent research by the Office for National Statistics (ONS), 41% of people in the UK will be made redundant, or need to take time off work because of ill health during their working lifetime. Even more worryingly, a quarter of households have less than £95 in savings to fall back on.
Unfortunately, no matter how hard you work, or how dedicated you are to living a healthy, balanced lifestyle, things can happen that are simply beyond your control.
Of course, if you find yourself out of work, there is the option of Job Seeker’s Allowance, but at just about £73.10 per week for adults over 25, for most people this would hardly be enough to cover even the most basic outgoings.
In the case of accident and sickness, most employers don’t offer company sick pay, especially if you’ve been in your role for less than two years.
Statutory Sick Pay (SSP) does offer a partial solution, but like Job Seeker’s Allowance, the weekly payments are relatively meagre. At about £94.25 per week, this is significantly less than the average UK salary, which means that without something to fall back on, most people would struggle to survive.
Fortunately, this is where Accident, Sickness and Unemployment Insurance can help. Also known as Accident, Sickness and Unemployment, this type of income protection covers you if you are made involuntarily redundant, or are unable to work because of an accident, injury or illness.
Acting as your own personal safety net, Accident, Sickness and Unemployment Insurance pays out a tax-free sum, known as a benefit amount, for up to 12 months in any one claim period.
This type of short-term income protection is designed to cover a portion of your salary, but not the total amount. The benefit amount you receive each month depends on how much you earn, but can be anything up to 65% of your gross monthly income.
Because the money is tax-free and paid straight into your bank account, it doesn’t have to be tied to any kind of financial commitment, like a loan or mortgage agreement. Most people tend to use the money to cover their rent, council tax and household bills, or to make sure they don’t fall behind on any mortgage repayments, but you are free to spend the benefit amounts however you choose.
When you select a benefit amount, bear in mind that although you can have up to 65% of your gross monthly income, you needn’t opt for the maximum if you think you could survive on less.
The amount you choose should be just enough to cover any essential outgoings, and should be balanced against the cost of the monthly premium (how much you pay each month), because most insurers will require you to keep paying this even after you claim.
To qualify for Accident, Sickness and Unemployment Insurance, you must be a permanent resident of the UK, Channel Islands or Isle of Man, aged between 18 and 64, and working full-time (16 hours a week or more).
As long as you’ve been working for the same employer for more than 6 months consecutively, you’ll be able to purchase a policy.
When you buy Accident, Sickness and Unemployment Insurance, you’ll need to be able to prove that you’re not subject to any disciplinary procedures or enquiry at work, and that you’re not aware of any potential redundancies or restructuring in your department.
If, after purchasing cover, you are told that your job is at risk, you won’t be able to make a valid claim and will need to cancel the policy.
Just like travel and home insurance, Accident, Sickness and Unemployment policies come with an excess period. Sometimes called a deferred or waiting period, this is the amount of time you’ll need to wait before receiving the first payment after you make a claim.
Chosen by you at the time of purchase, the excess period can be 30, 60, 90 or 120 days, with the addition of a ‘back to day 1’ option that will pay you in arrears from the very first day of your claim. As a rule, the shorter the excess period, the higher your monthly premium will be, so think carefully about the one you go for.
Most of our customers are confident that they can support themselves for the first month, and so choose a 30 day excess period, but make sure you select the one that’s best suited to your circumstances.
When you make a claim for accident or sickness, you’ll start receiving payments as soon as your chosen excess period is up, but for unemployment claims, you’ll need to pass what’s called an Initial Exclusion Period (IEP). Lasting between 60 and 120 days, this is the length of time you must wait after buying a policy before you can make a valid claim. The Initial Exclusion Period is a safeguarding measure, put in place to prevent people taking out policies when they are already aware that their job is at risk, and making a claim straight away.
To find out more about Accident, Sickness and Unemployment Insurance, it’s a good idea to speak to an advisor. Experts in all things income protection, our Specialists will compare quotes from the best insurers on the market to find the right policy for you.
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