Income Protection Versus Accident, Sickness and Unemployment Insurance
Published: 28th Jul 2010
There are many differences between Accident, Sickness and Unemployment (ASU) Insurance and Income Protection.
Income Protection is a long term policy but only covers the accident and sickness element, so it wouldn't pay out if you were made redundant. It does however pay out until retirement age so if you were unable to return to work for the rest of the policy you would still receive the monthly benefit until the selected retirement age of between 50 and 70.
Accident, Sickness and Unemployment on the other hand does cover the unemployment element but the benefit is only payable for a maximum period of 24 months, with some policies only paying out for 12.
Income Protection does have a longer and stricter underwriting process before the policy is accepted and cover can begin. It can sometimes require a medical or doctors report, however this strict process does mean if a client is accepted and needs to claim on the policy there is a much higher chance of the claim being paid.
ASU's application and underwriting process is a lot quicker but does have a slightly lower chance of a claim being paid.
Accident, Sickness and Unemployment policies can be paid out from day one of the event taking place, however they are backdated from 30, 60 or 90 days. This means the client must be off work for at least the specified amount of time or the deferred period as it is known. This is to stop clients claiming if they are off work for a matter of days, or weeks.
Income Protection deferment periods are usually an option of 4, 8, 13 and 26 weeks, or in some cases 1 or 2 years. There is no backdating available for Income Protection so the client would have to be able to survive for which ever deferment period they select. The longer the deferment period the cheaper the monthly premium for the client.
Another major factor in choosing between the policies can be what the money is going to be used for. ASU policies are linked directly to an outgoing such as a mortgage, loan or household bills where as Income Protection's monthly benefit can be used on anything. ASU pays a maximum monthly benefit of £1,500 whereas Income Protection can pay up to £14,583, however is must be deemed to be affordable to the client and not more than the amount they would receive from going to work.
Income Protection will stay pay out if a client has to return to work at a lower paid profession, however the benefits will be paid proportionately to unsure the client is not paid more for being off sick than going to work.
Some ASU policies do pay out on top of any sick pay mainly due to the fact that it is a short term benefit and the client can be off work for a longer period of time.
Like with most subjects, insurance comes with its own language which can include its own confusing terminology. Our Jargon buster aims to help you clarify what some of the terminology you might find on our website means so that you can fully understand the policies and covers you are considering.