4 min Read
07 Jul 2014

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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What is the difference between ASU and income protection insurance?

Reader Question: What is the difference between ASU and income protection insurance?

What is the difference between ASU and income protection insurance and ASU?I am a but confused on the difference between ASU and income protection insurance - can you help explain? I'm looking to protect my income but am going around in circles with all the different terms.

Thanks

Mr D Shaw

My response:

Accident sickness and unemployment insurance (ASU) and Income protection insurance appear very similar products, both paying out an income if you are unable to work.

However these two types of insurance policies are quite different and choosing the correct one for your particular needs can have a real effect on your household  finances. Below I look at the difference between ASU and income protection insurance before looking at when you might choose each.

What is Accident sickness and unemployment insurance?

  • accident sickness and unemployment insurance (ASU) will pay out a regular income if the policyholder is unable to work due to illness, being injured in an accident, or being made redundant by their employer
  • ASU is a short term insurance policy which means that any benefits are only paid out for a short period of time, typically 12 to 24 months
  • the level of cover is based on the basic monthly outgoings of the policyholder and is typically restricted to 60-65% of monthly income
  • although any benefits are only paid out for a short term the actual policy can continue for a long period, typically the length of the policyholder's mortgage term
  • premiums are usually paid monthly and the policy is simple to set up

What is income protection insurance and how does it differ from ASU?

  • Unlike ASU which provides benefits if the policyholder becomes unemployed, income protection insurance will provide a regular income if the policyholder is unable to work due to illness or injury only
  • With Income protection insurance policy benefits are usually paid out until the policyholder can return to work or retires or they reach the end of the policy term
  • the level of cover is typically restricted to 60-65% of monthly income like ASU
  • setting up income protection insurance is more complicated than ASU insurance requiring detailed answers to personal and medical questions
  • due to the more comprehensive cover offered by income protection insurance the premiums may be higher than for ASU insurance

Which insurance should I choose ASU or income protection

  • ASU and income protection insurance are quite often confused but are actually quite different policies
  • the main differences are the length of time potential benefits are paid for and the monthly cost of the two policies
  • income protection will require a medical and lifestyle questionnaire to be completed and these details will be taken into account when setting the premiums for your policy
  • as with all types of insurance the best choice will depend on your own circumstance so always seek independent financial advise before deciding the best policy for your needs

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