Accident and Sickness Insurance is a type of Income Protection designed to cover your monthly earnings if you can’t work due to illness or injury.
It will pay you a monthly tax-free income up to 70% of your pre-tax (gross) earnings if you’re out of work as a result of an illness or injury.
Most people worry they wouldn’t be able to keep up with their monthly outgoings – e.g. bills, groceries, rent / mortgage and other regular expenses – if off work sick.
Sickness Insurance is there to step in to offer a regular payment to keep up with these bills, providing loss of earnings protection if you can no longer earn an income.
The best Accident and Sickness Insurance will:
Accident and Sickness Cover is designed to provide insurance against the risk of:
You can add Unemployment Insurance for more comprehensive protection against loss of income due to forced redundancy.
It’s possible to buy Accident, Sickness and Unemployment Insurance combined, but such policies may only pay out short-term and have other limitations.
If Unemployment Insurance is desired, we often recommend purchasing long-term Accident and Sickness Insurance and ‘bolting on’ a separate Redundancy Insurance policy.
It is important when buying Accident Insurance to understand fully the restrictions that could be imposed on you so there are no surprises when you come to claim.
Pre-existing health conditions are not usually covered by most insurers, although you may be able to serve a period on the policy where you don’t receive any advice, medication or treatment for that condition and eventually gain coverage for it.
Aside from this, however, most policies do not have any standard exclusions and true comprehensive Income Protection Insurance will be medically underwritten.
As part of the application process you will answer a medical questionnaire declaring your current state of health so you know exactly what you will and won’t be covered for from the start.
When deciding if this type of insurance is worthwhile it makes sense to weigh up the risk of something happening and the potential consequences:
14.7% of the over-55s had been out of work for at least 6 months at some point during their careers, according to Drewberry’s 2018 Protection Survey.
Meanwhile, there were more than 2 million people who are what statisticians call ‘economically inactive’ due to long-term sickness in the 3 months to January 2019.
The risk of illness and injury – particularly long-term illness and injury – is higher than many people think and so getting this type of protection in place can provide an essential lifeline during such times.
With Employment & Support Allowance or ESA (the main state incapacity benefit) averaging at £73.10, someone who previously supported their family with their income could face severe financial hardship if they had to rely solely on benefits.
Although government benefits other than ESA are available, they rarely replace as much lost income as Accident & Sickness Cover is designed to.
If you lost your income how would you continue to pay your bills if you didn’t have any Sickness Insurance?
While some of us may be fortunate enough to have savings or employer-provided sick pay, for many people across the country that’s simply not the case.
Even for those of us lucky enough to be able to survive with savings and sick pay, how long would these resources realistically last in a true health emergency?
The average UK family spends upwards of £500 per week, yet our our recent survey revealed that 2 in 5 of us have no more than £1,000 in savings – just 2 weeks’ expenditure – to fall back on.
With sickness insurance, however, you can claim financial support to help you through periods of long term poor health.
The benefits you receive from your insurance policy can be put towards all essential living expenses so you can focus on getting back on your feet.
While Which? Money states that Income Protection is the one protection policy all working adults should consider, a statement we stand by, there are some groups of people who are particularly vulnerable:
There are some cases where Sickness Insurance may not be necessary, such as if you get a long period of sick pay and have plenty of savings to fall back on or you’re not the main earner in a household and your partner could cover your lost income while you were out of work, even if this is long-term.
Remember, even if you have sick pay, our past surveys have found the majority of workers get less than 3 months of full employer sick pay. That might be enough time to recover from a minor illness or injury but certainly not for anything serious, like cancer.
In addition to covering you for an accident or illness, some insurance policies include or give you the option to include unemployment cover.
For some policyholders, this type of cover can be very useful due to the sometimes inefficient financial support offered by Job Seekers Allowance.
Unemployment Insurance exists as either a standalone policy or a combined cover with Accident & Sickness cover that will temporarily pay out regular benefits if you are made redundant.
It’s important to note this cover will not usually pay out if you are made redundant / leave work for any of the following reasons:
Insurers will also typically decline cover if you have any prior knowledge of redundancy before setting up the policy, although how they define prior knowledge depends on your insurer.
For some insurance providers, this prior knowledge means that you have been given a formal letter stating that you are at risk of redundancy. For other providers, it could mean that the company has announced that they will be making redundancies in the business.
Redundancy Insurance considerations for the self-employed
Claiming on Unemployment Insurance will be very difficult if not impossible if you are self-employed as many insurers will consider you to be still employed by yourself, even if you are not currently working.
At the outset of the policy, you’ll have three major decisions to make:
Given the average length of a sickness insurance claim for LV is over 7 years we would generally recommend firstly looking at long-term protection.
You have three types of premiums open to you when choosing your Income Protection Insurance:
Different policies use different definitions of incapacity that define when you are entitled to claim benefits.
The best Accident and Sickness Insurance will cover you under an ‘own occupation’ definition of incapacity.
While this may not be available for all occupations, it is generally the preferred definition providing the most comprehensive cover.
Own occupation cover means that you will be entitled to your benefits as long as your injury or illness prevents you from working in your own specific job.
For example, if you are a surgeon and an injury prevents you from using your hand, you’ll be covered by your policy because you cannot work in your occupation with such an injury.
Policies that use a suited occupation definition of incapacity mean that in order to claim benefits, you have to be unable to undertake your current job role, or any other job where you may have experience or education to perform.
So where a surgeon with a hand injury may not be able to do their own job, they may not necessarily be able to claim under a ‘suited occupation’ definition because they would still be fit enough to work as a consultant or teach medicine.
This is a definition of incapacity that means you can only claim if you’re so totally unfit to work that you can’t work in any occupation / perform a set number of tasks required at most basic jobs.
This definition of incapacity is the most difficult to claim on and in general we’d recommend it’s best avoided.
Firstly, if you suffer an illness or injury that you believe will keep you out of work for longer than your deferred period you should notify your insurer immediately.
While you will not be able to claim your benefits until the end of your deferred period, it is vital that you make your claim as soon as you take leave from work so that your insurer can keep track of how long it has been since you stopped working.
When you make a claim, you will need to provide your insurer with a completed claims form and evidence of your health condition which prevents you from working, which is usually given in the form of a note from your GP.
Other evidence required might be in the form of notes from specialists / consultants or copies of diagnostic tests / scans – these should all be held within your medical records.
Once you’ve been out of work for longer than your deferred period, you’ll begin to receive a tax-free monthly income from the policy until either:
Neil is a client of Drewberry and took out an Accident and Sickness Insurance policy with British Friendly. He was a member for 4 years before he needed to claim.
He became unwell and had pains in his stomach. After consulting his GP and having some further tests Neil was diagnosed with stage 2 Bowel Cancer and needed to make a claim.
The vast majority of Income Protection providers now publish their claims statistics which is a real step forward in building trust.
Each year the Association of British Insurers (ABI) publishes average payout rate statistics from across all insurers. The latest figures are from 2017 and show that 87.2% of all Income Protection claims were paid, with over £600 million paid out in total.
Below is a table of the top 5 providers by their claims payout rate.
Legal & General
The cost of Sickness Insurance will depend on a variety of factors, including:
In the below table, we’ve laid out the average monthly cost of Accident and Sickness Cover as well as for Accident, Sickness and Unemployment Insurance.
To work out the cost of Income Protection, we’ve assumed:
The Income Protection quotes below were pulled from our instant online quote engine and represent the cheapest policy that matches the above criteria from across the entire UK market.
Accident & Sickness Insurance
Accident, Sickness & Unemployment Insurance
Accident and Sickness Insurance is a general term used to describe insurance policies that cover you if you develop an illness or injury.
In particular, there are three different types of insurance policies that will pay out if you aren’t well enough to work:
Income Protection Insurance is the most comprehensive of the different Sickness Insurance policy types and the one product that we highly recommend.
This type of policy is tied to your earnings and will pay out monthly benefits equivalent to a percentage of your pre-tax salary. This allows you to keep on top of your essential monthly expenses and bills if you are unable to work.
This type of cover comes in two different forms: long-term cover and short-term cover. Long-Term Income Protection can pay out for as long as the policy is active – supplying you with monthly benefits for a single claim until you reach retirement age if necessary – whereas a short-term policy will pay out benefits for a maximum of 1, 2 or 5 years per claim.
Payment Protection Insurance works in a similar way to Income Protection, but the main difference is that the benefits are usually tied to a loan or debt as opposed to your income.
If you need to claim on a PPI policy, you will receive monthly benefits that are either equivalent or closely aligned to the cost of one of your monthly loan payments, like your mortgage payments, for example.
This type of benefit cannot typically help you cover the basic cost of living, but the payouts can ensure that you don’t fall behind on important bills and slip into debt.
In particular, Mortgage Payment Protection is the most common type of PPI that will protect your monthly mortgage payments.
Unlike Income Protection, Payment Protection Insurance exists only as a short-term policy and will typically pay out for only a maximum of 24 months.
Personal Accident Insurance – also known as Personal Injury Insurance – is a type of Accident and Sickness Insurance that we at Drewberry normally warn people to avoid.
More information can be found in our ‘Beware of Personal Accident Insurance!’ guide.
Personal Accident Cover will pay out a cash benefit should you suffer an accident or receive a serious injury. The lump sum payment has no direct correlation with whether you are able to work or not – it simply pays out if you meet the criteria for that particular injury.
For many people this payout will not be enough to help them manage their injury and a payout may not last long if they are unable to work indefinitely.
The fine print is very detailed with these products and often includes the following standard exclusions:
For the sake of purchasing comprehensive cover for your finances if poor health prevents you from working, we would normally recommend Income Protection for most people.
This is because insuring a proportion of your salary gives you increased cover that can be used to not only pay off loans and bills, but also help you with necessary expenses such as food shopping and any other essential expenditure.
To find out more about the benefits of Income Protection you can read our guide Income Protection vs PPI.
AIG is one of only a handful Income Protection providers to offer cover for individuals with type 2 diabetes. It is also willing to offer diabetics guaranteed premiums and will not exclude diabetes in its policy, unlike other providers.
Aviva covers all policyholders with an own occupation definition of incapacity and, if you choose to return to work in a different occupation until you are well enough to return to your pre-incapacity occupation, Aviva will top up your reduced income with Back to Work Benefits.
British Friendly gives access to its Mutual Benefits program, which provides rewards such as vouchers for high street shops, discounted fitness tracking devices, emotional support services and online legal services.
Cirencester Friendly provides you with a range of additional benefits and services, including a hospitalisation benefit and a Friendly Voice service that provides you with a personal nurse that you can contact for advice and emotional support.
The Exeter is one of the few UK insurers that is able to offer own occupation cover to workers in higher risk occupations, although such policies only offer age banded premiums.
L&G offers a free life cover element that pays out a maximum of 12 times your monthly benefit if you pass away while the policy is in force.
LV offers free access to unique LV Doctor Services, which include fast access to remote GP services, second opinion services and private prescriptions for policyholders and their children up to the age of 16.
Royal London can include Fracture Cover, which pays out a lump sum of between £1,500 and £4,000 on top of any benefit you’d receive for being off work if you receive a fracture of a specified body part
Shepherds Friendly allows you to apply to suspend cover and premium payments under your plan for a minimum continuous period of 3 months and up to a maximum continuous period of 24 months. This is known as ‘Career Break’ option.
Vitality provides a unique offering. While the core of its policy is similar to other providers’ offering, it also offers a unique set of additional benefits to those who participate in the Wellness / Optimiser programs that can include policy discounts and rewards.
With all nuances and potential pitfalls to avoid we are here to support. We want to provide you with all the information and knowledge you need to set-up the most appropriate financial protection for you and your loved ones.
We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.
If it is all getting a little confusing and you need some help then please do not hesitate to get in touch.
Pop us a call on 02084327333 or email firstname.lastname@example.org.
Director at Drewberry
Sam was very helpful and kept me informed at all times. Brilliant service.