Kesh Thukaram, a founding director of Best Insurance, elucidates on the cost considerations. “ASU provides a monthly benefit. The maximum monthly payment ranges from £2,000 to £3,000 a month, although most providers restrict their benefit to £2,000.
“An average investment of £1 a day enables policyholders to cover themselves for about £1,000 a month when a claim is paid, and the benefits can continue for up to 12 months.”
Mr Thukaram contests that, even if someone renews their policy every year for 10 years, and makes a claim in the 10th year, the return on their investment would be 300 per cent.
“When compared to other optional insurances, the value and return on investment with an ASU policy is one of the highest,” he avers.
How it works
According to Rob Harvey, adviser at Drewberry, the protection cover is short-term, lasting for 12 months or so typically, and is renewable annually.
He adds: “That means if you become ill, injured or are made redundant you can make a claim for a maximum of 12 months.”
Says Jason Berry, director of sales for Uinsure: “The provider will give the client a proportion of their salary during the time they are unable to work, so they can keep up with financial commitments.”
Mr Heffer explains there is some flexibility over the term, and there are different options for clients.
He says: “Most policies on the market pay out for up to 12 months; some can be arranged with shorter payment terms, such as six months; and a few can be set up for 24 months.”
Typically, there is an excess period of 30 days. This means that following a claim, there is a period of 30 days before any benefit becomes payable. Mr Heffer adds: “Other excess periods can be selected, for example, 60 days and 90 days, and the cover is therefore cheaper, but the client may not be able to cope financially in the meantime.
“Most plans allow optional Back-to-Day-One cover, which means that after the excess period the first benefit payment is back dated to cover the period since claim.”
However, Back-to-Day-One cover is a more expensive option, so it is worth considering this when discussing short-term protection needs with clients.
Potential pros and cons
For Dean Mason, director of Masons Financial Planning, ASU “provides peace of mind for clients concerned about losing their jobs or being unable to work due to an accident or short-term illness.”
Also, as standard, ASU products should include legal expenses – including employment disputes – for all members in the household, plus carer and hospitalisation cover.
Yet while unemployment cover is “much the same across the market”, meaning it is relatively easy for advisers to compare similar cover, according to Mr Harvey, there are significant differences between the accident and sickness element of ASU and policies such as income protection (IP) and critical illness cover (CIC).
