If you’re classed as an employee, it’s likely you’ll have a sick pay scheme in your employment contract. Employers are required by law to give statutory sick pay (SSP). If you find yourself needing more time and help than SSP can provide, it’s practical to protect yourself with ASU or Income Protection if you’re thinking about giving up work.
The difference between ASU and IP is why they pay out and how.
If you only need to cover debts and bills, ASU should be enough to keep you going. If you have substantial outgoings and commitments income protection could be a longer term level of cover.
Accident, Sickness and Unemployment insurance (ASU) pays out if you lose your job or can’t work through illness, injury or redundancy.
ASU is a short term payment protection insurance. You can only claim for a maximum 12-24 months as payouts are restricted.
Payouts will usually be limited to 60-65% of your income. Cover levels are based on your mortgage and monthly outgoings .
ASU is seen as informal and easy as you’ll pay a monthly premium until you cancel the policy or a claim is made.
Income Protection Insurance
If you’re unable to work for health reasons and have finances that are ongoing, IP gives longer term cover.
Income protection is essentially a replacement of your lost income. The policies are based on your earnings, up to a 65% maximum, but don’t typically cover redundancy.
Some IP policies only pay out if you can’t perform your job role anymore. There are more policy options to protect an existing job but they will be more costly.
Income Protection is likely to include personal questions and a medical. Although IP is more expensive than shorter term ASU, it will pay out indefinitely until you can return to work, find a new job or even retire.
When deciding whether you should give up work, you should think carefully about your circumstances. Decide if cover is right for you by speaking to a specialist, think about what you want the cover to do and how much you can afford monthly on premiums.
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The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.