Accident, Illness and Redundancy cover

bobarella's picture

I am now just over 26 weeks pregnant, so starting to think about all of the dull and boring things that would make my and my families lives easier in case of emergency.  My husband and I are in the process of making wills, have the drafts back and just need to get the documents witnessed.

The other 'gap' in our armour is the dreaded what would happen if either of us was unable to work for reasons such as accident, illness or redundancy.

In my case at the moment I am heading for maternity leave, planning to return full time after 6 months.  Husband will continue to work full time in this period and we shouldnt suffer too badly as a result.

We have around 2 months household outgoings saved for emergencies and are adding to this all the time. We'd like to get to 6 months in savings eventually but its taking quite a while to build up.

We have life insurance and critical illness cover so both our mortgages would be paid in full if either of us died, and we have the critical illness in case something dreadful happened.

But what would we do if we were temporarily out of work and we used up our savings?

I've been looking into accident, illness and redundancy insurance and the first thing I found was that

A) It doesnt tend to kick in for between 60 and 90 days into your period of you not being able to work.

B) It doesnt cover your entire outgoings only up to 60% of them. So you would probably be alright for mortgage and bills but its not going to cover your non-essential spending.

The cheapest I could find was around £25 a month and that would kick in after 90 days and last up to 1 year.

I am quite a cautious person so the idea of knowing we'd have some help towards the mortgage and bills in the case of emergency would be good, but what do other people think? 

The views I've seen expressed by Merryn Somerset Webb (my heroine) and various other financial journalists is that you might as well skip this cover and just put the premiums into your emergencies pot because you are only covered for a year in most cases and you may as well just keep building up your holdhouse savings pot and earning interest instead of paying some insurance companies Gilt investments.

Also, although Im planning to be off for that 6 months, at the moment and we could afford it for me to return to work full time and to pay nursery bills so the likelihood of both of us suddenly being struck down by illness or made redundant seems low. If one of us is working and we have the 6 months emergency money then we could manage without this insurance.

So Im not really sure what to decide. £25 a month is one trip to a mid range restaurant these days or a night down the local gastro pub. Not saying we do a lot of that at present as Im not drinking anyway but Im just illustrating that perhaps for the peace of mind it would offer I should set up a policy.!!!

Your Comments

Have you looked at the Post Office range? I can't remember the exact details off the top of my head,but I'm sure it is cheaper than £25.

I suppose the question is,is it really worth paying out for,or is it better to put it in the bank against the unlikely chance of needing it.

It could be worth thinking about taking out Income Protection (IP) Insurance. Unlike Accident, Sickness & Unemployment (ASU) cover or Mortgage Payment Protection (MPPI) cover, which would only cover you for about a year, IP would cover you or your husband until you are well enough to go back to work or until you reach retirement age.

Up to 70% of income (tax-free) would be covered (insurers would never cover 100% of the income as that is seen as deterring people from going back to work). The cost of the cover depends on what type of job you've got - 'the riskier' occupation you've got the more expensive it is - and how long you want to wait until you receive your payout.

By prolonging the period between being signed off work and receiving the first payout you would decrease your premium so if you've got some money tucked away that would enable you to survive financially for, lets say, three months it could be worth taking out IP with a 12 week deferment period. If not, most insurance providers offer a four week deferment period and some even offer cover from day one.

While ASU and MPPI are seen as offering more competitive rates (they are often pushed by big banks as they make massive profits on these products) you can often get IP at a very similar rate (if not cheaper). IP is also more comprehensive as it would cover back pain and stress-related claims - something that is not always covered under ASU and MPPI despite being the most common reasons people are absent from work.

When taking out IP you could also be covered for your own occupation, which means that if you can't do your own job you would get a pay-out. If you have ASU or MPPI you would only receive a pay-out if you can't work at all, which means that as long as you are seen as being able to perform some kind of work you would not be able to claim on your policy.

It is important to note however that IP would not cover for unemployment unless you specifically ask for that cover to be added.

Best is probably to contact a financial adviser who would be able to get you a few quotes. As an example, however, a non-smoking man aged 35 in a low-risk occupation (like working in an office for example) who wants a payout of £2,000 a month to the age of 60 with a deferment period of six months would pay around £25 a month (this rate is from Friends Provident).


Thanks both of you for the very useful comments. I hadnt heard of IP insurance and that does sound like a far better option.

I will have a quick play on Moneysupermarket and see what they come up with.

Thanks again!


Congratulations on winning the blog of the month competition. This was a great post and worthy winner.

Thanks very much

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