Another day, another insurance and protection product we’re gonna take a look at. Today it’s Accident Sickness and Unemployment cover (ASU – cos it’s a mouthful otherwise). It sounds like a shitty name for a band, but it’s a fun little product that we’re going to look into a bit more detail.
As a qualified Protection Adviser, I am literally qualified to give advice on what insurance and protection cover I need, but I can only do that because I know my own circumstances intimately. Reeeeeeeeeeeeeal intimately. Nothing in this article should be seen as giving advice to you, just letting you know what the options are and what they do.
There are a load of different insurances out there, and you really must speak with someone who is qualified to give advice on the subject to figure out what’s best for you, but I’m going to look specifically at;
Let’s answer “Do I need Accident Sickness and Unemployment cover?”
Clue is in the name really. If you have an accident, if you get sick or if you’re made unemployed, then ASU has your back. It will pay out in the event any of those three conditions are met.
At first glance, it looks a lot like Income Protection that we covered in this blog article. However the main difference are the time frames involved. ASU tends to kick in quite quickly and pays out for a relatively short time. Think of it likely to kick in after around 30 days (can be varied) and it will pay out for 1 – 2 years (again can be varied).
If you have a good job that pays a good level of sick pay, then you might be able to get away without ASU and be fine with just IP. However, how screwed would you be if you lost your job?
Let’s face it, not many employees have that much control over the company that pays them, so it’s not beyond the realms of possibility that no matter how long you’ve been there, or how important you (think) you are, there’s a chance your ass could get ditched. Then what?
Or if you get into an accident that’s not your fault (finally someone could actually talk to those asshats that keep calling me telling me I’ve been in an accident…pricks), and you’re not able to work anymore, what ya gonna do for cash money?
ASU covers you for the short(ish) term so you can keep your head above water while you get over it or get yourself a new job.
If you have financial dependants then ASU can give you some confidence that you can take care of yourself and them if you do get a bit screwed over by life.
Without ASU: Mr M has a great job and is really good at it. He’s been touted as future Director potential, but the economy tanks and the firm has to make some harsh cuts.
Redundancies come around and Mr M is selected to be axed. Sad times.
He gets a pay out, but it’s not much as he’s only been there for just over a year. He quickly pisses through the payout on rent, food, car payments, Netflix, hookers (guy needs cheering up). The savings he did have go as well, and within 2 months he’s broke.
He starts missing payments on his rent, so gets evicted, he also can’t keep up his car repayments so the car gets taken off him, but worse is the fact he now has a load of CCJ’s against his name.
He’s applying for lots of jobs and after 5 months he has another job. But he’s now got an impaired credit file, lives on his mates couch, has gotten fat cos all he ate was pot noodles for 4 months.
He’ll now never make Director level because he has a poor financial record and weirdly that’s an important criteria for a lot of industries.
With ASU: Miss P got knocked off her bike on the way to work. In a comically awful way, the kind that means she can’t work for 5 months. Think full body cast.
Her employer is a bit shit so pays the bare minimum in statutory sick pay, and she can’t really afford her life without receiving her full income.
Fortunately, her ASU kicks in after 30 days and pays out enough for her to keep up all her repayments and relax and focus on recovering rather than worrying about money.
Because it covers the three scenarios of you being in an accident or getting sick or being made unemployed, it pays out more frequently than Income Protection which is specific to getting sick. Because there is a higher probability of it paying out, it’s more expensive than IP tends to be. However it only pays out for a relatively short period of time, maximum usually 2 years and minimum about 6 months… so you can mess around with how long of a delay there is before it pays out and for how long it pays out to reduce the costs.
Let’s use me as the example human. A mid 30’s chap in fairly good health that doesn’t smoke and who wants an income of around £2,500 per month if he can’t work ever again.
I’ve got some savings, but don’t want to piss through them, so I want it to kick in after 30 days. But I do have an Income Protection policy in place that kicks in after 12 months, so I just need 1 year cover from my ASU.
A very quick scan of what’s available right now (accurate as of 4th May 2018), the cost of this ranges from £74.13 per month all the way up to £141.86 per month.
Things that will affect the price of this is your job, how much you earn and want covered, but importantly the timeframes involved in the cover. What’s the deferral period and what’s the maximum pay-out term?
You can fiddle with these until you’re happy with the price.
It seems kind of expensive, but remember that according to depressing stats, the vast majority of us will suffer some kind of injury or illness that puts us on our arse for longer than 3 months. So there’s a reasonable chance you’ll get a payout from your ASU cover.
Personally, I’m not going to take out any ASU. I have enough savings and passive income to be comfortable that I can handle any short term ‘incidents’, so it’s only if it ended up lasting the rest of my life that I’d want someone else to gimme money on a regular basis.
Is it useful for you? No idea.
As ever, it’s on you (with the help of a good financial adviser) to figure out what’s right for you. ASU fills a great gap to help you cover the gap you might have if anything shitty happens to you.
The stats are terrifying when you look at how many people are affected by an accident or illness each year that causes them to take time off work. And given most people don’t have much in the way of a cushion to help during these times, then ASU could be a stop gap that takes the pressure off.
Personally I prefer the idea of being able to self-insure for the short term by having a 3 – 6 month savings buffer. If I didn’t have this amount of money tucked away, then maybe ASU would appeal more.
There’s a calculation you could do to figure out how much you’d need to invest to pay you the equivalent of the cost of ASU. I know, that was kind of a confusing sentence wasn’t it?
Let’s say you need £100 a month to pay for ASU. Then how much do you need to invest to earn £100 per month? If you can get 7% a year, then you’d need £17,150 invested. I guess if this is less than you would need to tuck away to give yourself 6 months buffer, then ASU paid for by investments is a good idea.
If you don’t have a buffer, then while it may seem expensive, it may be a good idea to have some cover should the shitty happen.
Simply enter your email below and download the 8 simple steps to financial freedom.