Accident, Sickness and Unemployment Cover: Protecting Your Mortgage Payments
When you take on a mortgage, your monthly repayments depend on your ability to keep earning. But what happens if you are involved in an accident, suffer an illness that prevents you from working, or are made redundant? Accident, sickness and unemployment (ASU) cover is designed to protect your mortgage payments and wider financial commitments when life does not go according to plan. It is one of the protection products our team at Akers Pritchett can help you arrange alongside your mortgage.
What Does ASU Cover Provide?
ASU cover pays a monthly benefit if you are unable to work as a result of an accident, an illness, or involuntary redundancy. The benefit is typically designed to cover your mortgage repayment and, depending on the policy, a proportion of your broader monthly outgoings. It is a short-term product, paying out for a defined benefit period, usually up to 12 or 24 months, while you recover or find alternative employment.
How Is It Different from Income Protection?
This is a common question and an important distinction. Income protection is a longer-term product that replaces a proportion of your salary if you are unable to work due to illness or injury. It covers you until you can return to work or the policy term ends, but it does not generally cover unemployment. ASU cover is shorter in duration, specifically designed as a financial bridge, and crucially also includes the unemployment element. Some people choose to hold both products, depending on their employment situation and the level of cover they want.
What Is Typically Not Covered?
Voluntary redundancy and resignation are not covered under ASU policies. Pre-existing medical conditions may also be excluded depending on the policy terms, which makes it important to review the details carefully before taking out a policy. For self-employed clients, the unemployment element of ASU cover is generally not available, as involuntary redundancy does not apply in the same way. Our advisors will always explain what a policy covers and does not cover before making any recommendation.
When Should You Consider ASU Cover?
Taking on a new mortgage is the natural moment to consider whether ASU cover is right for you. Whether you are a first-time buyer, moving home, or remortgaging, your commitment to monthly repayments begins on day one. If you do not have sufficient financial reserves to cover your mortgage payments through a period of illness or redundancy, ASU cover can provide that crucial safety net.
Our protection advisors will review your circumstances, consider any existing cover you already have in place, and advise whether ASU cover makes sense alongside your other protection arrangements. Get in touch today for a free, no-obligation conversation.
Frequently Asked Questions
Is there a waiting period before ASU cover begins paying out?
Yes. Most ASU policies include a deferred period, which is the number of days you must be off work before the policy starts paying. The length of this period varies, and a longer deferred period usually results in a lower premium. Our advisors will help you choose a deferred period that reflects how long you could realistically manage without income before needing the policy to kick in.
Can I get ASU cover if I am self-employed?
The accident and sickness elements of ASU cover are generally available to self-employed applicants. However, the unemployment element is typically excluded, as self-employed individuals are not usually entitled to redundancy pay in the same way employees are. Our team will discuss which products offer the most relevant protection for your working arrangements and overall circumstances.
How much will an ASU policy pay out each month?
ASU policies are generally designed to cover your monthly mortgage repayment and, in some cases, a proportion of other regular outgoings. The benefit amount, benefit period, and premium will all vary between policies and providers. Our advisors will help you identify a level of cover that genuinely meets your needs without stretching your budget unnecessarily.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
As with all insurance policies, conditions and exclusions will apply.