Imagine not having to worry about a sudden or unexpected loss of income completely undermining your carefully made personal budget. It’s the budget, of course, that accounts for practically every item of spending from the salary you earn every month from work. Accident sickness redundancy insurance is a way of answering your dream and relieving you of the worries by paying the very modest monthly premium that a simple insurance policy costs.
Like most good ideas, the principle is simplicity itself. If the policy holder faces losing their income by having to take time off work to recover from an accident or illness or if he or she is made redundant, the insurance simply pays a replacement income in its place. In a nutshell, that is all that there is to accident sickness redundancy insurance. The name says it all so succinctly that it is often shortened to its acronym, ASU insurance. At a time when others might be stacking up unpaid debts – finding themselves a hostage to fortune when the debts need finally to be repaid – the individual with ASU insurance continues to pay the bills, whether of the normal, everyday kind or the critical ones, such as the mortgage or rent or repayments on personal loans and other forms of credit.
Just how much of a replacement income accident sickness redundancy insurance delivers depends on the amount of cover that the intended policy holder proposes to buy. Following a recent ruling from the industry regulators, providers of this kind of payment protection insurance are obliged to advertise the price of premiums per £100 covered, so it is a simple calculation working out how much the desired level of cover will cost. The maximum amount is usually related to the policy holder’s normally earned income and a typical limit, therefore, is 50% of that normal gross income, or £1,500 a month, whichever is less. Clearly, this would produce a generous percentage of the income usually earned (when able to work normally) and is generally quite sufficient to tide the policy holder through a period of convalescence or a period of unemployment whilst looking for another job.
The claims procedure makes it easy to rely on accident sickness redundancy insurance as a form of income protection. Most policies require a given “waiting” period to be completed before a claim is submitted. Generally speaking, this can be anything from 30 to 90 days’ absence from work or out of a job. It is frequently referred to as the “qualifying period”. The insured benefits become payable upon completion of this qualifying period, with some policies backdating the effective date of payments to the first day’s absence from work or the first day of redundancy. Other policies, however, might treat the qualifying period as a form of policy “excess” during which the policy holder bears any financial loss him or herself.
Fairly clearly, if the insurance was completely open-ended and paid out more or less indefinitely, the premiums would need to be very high indeed (to cover the potential liability taken on by the insurer). Instead, therefore, policies are usually written with a typical maximum of 12 months during which the insured benefits are paid. By limiting the potential liability in this way, the insurer is able to keep the price of premiums at an affordable rate, whilst the policy holder remains fully protected with a replacement income long enough to recover from injuries sustained in an accident, or be restored to health after an illness, or, of course, to find alternative employment following redundancy.
Whenever buying an insurance policy, it is always important to check the criteria of eligibility for the cover being sold. There can be nothing more disappointing than to buy something which you thought gave a certain range of protection, only to find, when it comes to the crunch and a claim needs to be made, that you did not meet the eligibility criteria in the first place – and so the cover is invalid. Fortunately, eligibility for accident sickness redundancy insurance is very widely defined and will contain few surprises. Proposed policy holders need to be working (and not on sick leave from work) at the time the cover is arranged and must show that they have been in regular employment for at least the previous six months. They need to be available for work (not having reached retirement age) during the term of the insurance and they will need to be resident in the UK, Channel Islands or Isle of Man.
An area that worries a number of people about more or less any kind of insurance is the issue of exclusions. Accident sickness redundancy insurance has very few. Clearly, there must be no actual or impending notice of redundancy in operation before taking out the insurance and claims under the redundancy provisions are usually subject to an initial “exclusion period” (typically of 180 days). No medical is required in order to arrange the insurance, although pre-existing medical conditions may nevertheless invalidate a claim.
Accident sickness redundancy insurance is being improved and developed all of the time. One of the latest innovations lies in its being able to assure the policy holder of a replacement income if they need to take unpaid leave of absence from their normal job in order to look after a close member of the family. Such exciting new benefits are available with some policies and are added to the “normal” risks of accident, illness or unemployment. Thus, the policy holder is covered in exactly the same way if he or she needs to take time off work to give full-time care to an immediate family member.
This latest innovation helps to underscore just how flexible accident sickness redundancy insurance can be. Just as the name suggests, it covers the risks of losing an income because of incapacity or unemployment. What some consumers might not realise, however, is that it is perfectly possible to buy cover that is limited to either incapacity or unemployment on a standalone basis. If incapacity poses no problem – because of an employer’s in-house sick-pay scheme, for example – then redundancy cover can still provide the replacement income needed if the policy holder becomes unemployed. Conversely, if redundancy is adequately covered by a package already negotiated between the employer and staff, then accident sickness insurance alone might be the order of the day.
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