What’s in a name? A very great deal if the name of this particular variety of insurance is anything to go by. The name alone spells out the wide range of risks covered in accident sickness unemployment insurance and provides the first clue to understanding why it could be important to maintain your defences against these key areas of risk to the steady and regular income on which you no doubt rely.
Accidents, illnesses and redundancy all can take their toll on the receipt of a regular income from work. Accidents and illnesses lead to time taken off work and sooner or later, with the best will in the world, even the most generous of employers is likely to turn that absence into unpaid leave. Redundancy, of course, represents a more final break with the employer and entails the certain cessation of paid income. In any of these events, the loss of income represents the beginning of a very difficult time for the individual concerned, who will struggle to pay normal, everyday expenses and such essential ongoing commitments such as the mortgage or rent and repayments on loans and credit.
Accident sickness unemployment insurance is a simple device designed to take the heat out of those immediate worries by providing either a complete, general purpose replacement income or benefits specifically targeted towards the repayment of the mortgage or other borrowing. These insured benefits become payable – free of tax – shortly after the policy holder has become incapacitated to work or unemployed and generally continue for up to a year, thus providing a safe and secure “period of grace” during which to recover from an accident or illness or within which to find alternative employment.
Accident sickness unemployment insurance allows the policy holder effectively to choose just how much he or she will receive each month in the event of a claim. The amount paid in premiums is directly proportional to the benefits paid out. Thus, premiums are quoted at a price per £100 of cover bought – in other words, the amount paid out in benefits. Selecting the amount to be covered is also likely to be influenced by the purpose to which any benefits will be put in the event of a claim – namely whether the use will be as a general replacement income, or to cover specific repayments such as the mortgage or other loans. The typical limit on the maximum amount of benefits that can be insured in this way is 50% of the policy holder’s normally earned income, or £1,500 a month, whichever is less.
Once a claim has been made and the benefits of accident sickness unemployment insurance are in payment, they continue to be paid until the policy holder is well enough to resume normal working, has found alternative employment, or after a typical maximum of 12 months, whichever comes soonest. Some policies offer the option of extending this maximum payout period to 24 months, although the premiums will in that case cost rather more.
It is appropriate, at this stage, to reflect on the impact that the maximum insurable amount and the maximum payout period has on accident sickness unemployment insurance. In fact they are defining features of this type of insurance. In the first place, they help to illustrate that the insurance is designed to provide essentially short- to medium-term assistance during a temporary crisis brought on by a loss of income that can be expected to be resumed within a reasonable period of time (i.e. usually within a year). In other words, the underlying assumption is that the policy holder will recover from an accident or illness and return to work within this period or he or she will have found a new job after being made redundant. These are important assumptions for the insurer, too. With a defined maximum level of insured benefits and the duration of benefit payments limited to a maximum of 12 months, the insurer retains quite a tight rein on the potential liability to which the policy is exposed. Reduced liability can then be translated into much cheaper premiums for the policy holder. It is a win-win situation for both policy holder and insurer.
The well-defined parameters of accident sickness unemployment insurance also help to keep the claims process simple and straight forward. One of the tests of whether any of the insured events (accident, sickness or unemployment) is likely to lead to financial loss is the length of time the policy holder is away from the workplace. Therefore, claims can be made upon completion of an initial brief “waiting” or “qualifying” period following the policy holder’s first day of absence from work or first day of unemployment following redundancy. The duration of such a waiting period will vary from policy to policy but is typically in the region of 30 to 90 days. Shorter qualifying periods tend to be more popular, of course, since there is a greater likelihood of a claim qualifying and the benefit payments will be received rather sooner.
Anyone who is currently in employment and actually working (that is to say, not off sick) is eligible to apply for accident sickness unemployment insurance. They must also have been regularly employed for at least the past six months and be resident in the United Kingdom, Channel Islands or Isle of Man. Proposed policy holders need to available for work and not have reached retirement age throughout the period covered by the insurance. Clearly, it would be an abuse of the unemployment provisions if the policy holder already had notice of a redundancy or impending redundancy at the start of the cover and, indeed, claims under this heading are generally excluded for an initial period (typically of up to 180 days). Although no medical is required in order to take out accident sickness unemployment insurance, pre-existing medical conditions are likely to be excluded, as are common workplace conditions such as “backache” and “stress”. Insurance policies should always be read carefully, of course, to ensure that the policy holder thoroughly understands these and any other exclusions relating to the policy.
Related Posts