Sales of unemployment insurance policies surge 110% post-Covid: What is it and who needs it?

The number of Britons buying accident, sickness and unemployment insurance has skyrocketed in recent months, as workers look to protect their income against illnesses and job losses. 

Concerns over the economy and the aftermath of the Covid pandemic have led to a 110 per cent increase in sales in the first three months of 2022 compared to the previous year, according to data from insurance broker Assured Futures.

After redundancy rates hit record levels in 2020, it is perhaps not surprising that workers are looking to effectively insure a portion of their salaries, in case they are out of work for a period of time. 

Contingency: Accident, sickness and unemployment insurance can cover part of a salary if the policy holder is unable to work or loses their job through no fault of their own

Sales are also said to be increasing because more new policies are available, after many were pulled during the pandemic.

This recent spike comes despite premiums being higher than they were before pandemic, averaging between 75p and £10 per day. That equates to between £274 and £3,650 per year.  

This is Money explains what exactly accident, sickness and unemployment insurance is, what is covered and who is eligible. 

What is accident, sickness and unemployment insurance?  

Accident, sickness and unemployment insurance is a type of income protection to cover you financially in times where you may be unable to work. 

This includes absences due to illness or injury, being made redundant, or losing a job through no fault of your own. 

Cover works in broadly the same way car or home insurance does. The policy holder will  pay a set monthly premium, and if they have to stop working they will receive a monthly payout reflecting a certain proportion of their usual salary.

While policies can vary, customers would usually agree to a 12-month policy which would protect up to 70 per cent of their current income. 

In the unfortunate event that you would need to claim, the policy would pay out over a 12 to 24 month span, which would hopefully be long enough to help you find another job, or recover from an accident or short-term illness.

Its worth noting that accident, sickness and unemployment insurance is slightly different to other forms of unemployment insurance.

Other forms of income protection are designed to cover a specific bill, for example a mortgage. In contrast, accident, sickness and unemployment insurance works by paying out a percentage of income directly to the policy holder to help them cover all of their expenses.

Who is eligible for ASU cover?

Since the pandemic, eligibility has become quite restricted in some cases. 

In order to take out accident, sickness and unemployment cover, customers need to be aged between 18 and 65, a UK resident or taxpayer, and currently working at least 16 hours a week.

Insurers will also take into account how long they have been employed in their current role. To benefit they need to have been a permanent employee in one job for the minimum period specified by the policy, usually 12 months.

Applicant will also need to answer some detailed questions about their job, health, leisure activities and medical history, which may impact the premium they pay and limit their options.

Any accident, sickness and unemployment insurance policy won’t be valid if it is taken out when the holder already knows they are at risk of redundancy.

Some occupations are also not covered by this type of policy, so be sure to check with a broker or your chosen insurer to see if you are eligible. 

It is possible to get cover if you are self-employed, although premiums will likely be higher.

What do ASU insurance policies not cover? 

Accident, sickness and unemployment policies only protect against a limited set of circumstances, and unfortunately there is a much longer list of things they will not cover. 

The policies cover you in case of involuntary redundancy, paying out up to 70 per cent of your overall income

The policies cover you in case of involuntary redundancy, paying out up to 70 per cent of your overall income

Policies will generally not cover voluntary redundancy or instances where individuals are dismissed for misconduct, or fired. They also won’t be covered if they leave their job through personal choice, or if they fall ill due to a pre-existing condition which they suffered from before they took the policy.

The cover usually has a waiting period, which is a set length of time determined between the policyholder and the insurance firm for when they would be able to make a claim. This commonly lasts for the first six months of a policy. 

Policies also don’t tend to cover illness due to Covid-19, though they sometimes offer coverage if a policy holder is ill for a prolonged period or suffering from long-Covid. 

It is vital to read the terms and conditions to see what you are covered against specifically.

Who should take out protection insurance?

According to the Office of National Statistics, redundancy levels in the UK were the highest since records began between September and November 2020. 

The Covid-19 pandemic highlighted the risk of being made redundant for many, and those who want to be protected in future may wish to consider accident, sickness and unemployment policies. 

Meanwhile, recent research from Shawbrook Bank estimated that 16 million people in the UK had less than £100 in savings, while one in five said they expected to dip in to their savings to cover basic costs in the near future. 

ONS data shows how redundancy levels soared to record highs in 2020 due to Covid-19

ONS data shows how redundancy levels soared to record highs in 2020 due to Covid-19

This potentially leaves millions with no safety net if they found themselves without a job or with an illness that left them unable to work. 

Job Seekers Allowance is currently set at up to £77 per week for over-25s, which is unlikely to cover outgoings for many people if they were left unable to work for a period of time.

Ian Sawyer, commercial director at Assured Futures said: ‘As a result of the pandemic, many people are more worried than they were before about being made redundant. 

‘Now that the furlough schemes have finished, people are starting to realise that they need to protect themselves where possible, so products that offer unemployment protection have never been more important.

Shawbrook Bank has suggested that 16million people in the UK have less than £100 in savings, leaving them at severe financial risk if they were to lose their job or become seriously ill

Shawbrook Bank has suggested that 16million people in the UK have less than £100 in savings, leaving them at severe financial risk if they were to lose their job or become seriously ill 

‘Taking into account the rise in the cost of premiums – and the fact that many consumers are not aware that ASU is back – this spike in sales is a really positive sign for the industry and consumers. 

‘Given the clear demand for this type of cover, we expect to see more providers come onto the market, which should then make premiums more competitive.’ 

Of course, not everyone will be able to afford the extra expense of unemployment insurance, especially those already struggling. 

Sally Conway, head of consumer communications at Shawbrook, suggested that anyone with financial concerns should contact their bank and debt charities. 

‘If you are struggling in the current climate and you’re worried about the ongoing impact, it’s a good idea to talk about your situation. Speak to your bank and find out how they can support you,’ she said.

‘Although speaking with friends and family is a great way to deal with the emotional impact, it could be useful to reach out to a free money advice service, such as the Citizens Advice, for some extra guidance. 

‘Not only can they offer hints and tips on budgeting, but they can also support you with managing any debt. 

‘Our research shows people are turning to these services already, as well as reviewing budgets, and if you’re in a similar position please do seek out support.’ 

Four in five Britons reported that they feel unsure about the future state of the UK economy, in a sign that financial anxiety is on the rise following the Covid pandemic and soaring cost of living. 

cheapest life insurance finder