This means clients might need to consider ASU alongside other types of insurance.
Mr Harvey explains: “IP can be long-term, meaning it can pay out until retirement age if you're unfortunate enough to be in a position where you can never work again through illness or injury.
“This is opposed to the 12-month payout on ASU policies, which would be very restrictive for many people who develop long-term conditions.
"Also, you may find ASU policies have automatic exclusions on the accident and sickness aspect, such as excluding claims for bad backs and mental health without considerable evidence from a UK consultant.”
He says that, given most bad backs and mental health conditions are treated and managed by GPs and a consultant referral can take a long time for these issues through the NHS (if it happens at all), this can be a significant barrier to making a successful claim through an ASU policy.
Mr Harvey goes further: “For example, for bad backs, radiological evidence is usually required for a claim – with most bad backs down to muscular issues not typically readily visible radiologically – this again puts another barrier to claiming on an ASU policy for what is one of the biggest reasons for claims on IP policies."
However, Mr Mason says the differences between IP and ASU can sometimes work in a client’s favour: “All clients are accepted on application for ASU, but pre-existing conditions are not covered.
“An IP policy is underwritten upfront, meaning the insurer assesses the risk at application and adjusts the premium if they feel the client is at greater risk.
“With ASU, they are underwritten when a claim is made”.
However, if the claimant has not disclosed a situation – for example, if the employer had already made a public statement about potential layoffs before the individual took out the cover, or they had a pre-existing medical condition for which they were off work, this may invalidate the claim.
This is not the only issue. According to Alan Lakey, founder of CI expert, sometimes clients can find themselves at the mercy of an insurer’s whimsy.
He says: “ASU plans are annual contracts, which is their main weakness. The insurer can refuse renewal, change the terms and – as has happened on numerous occasions – simply leave the market.
“It operates like a car or house insurance, in that a claim means amended terms at the renewal stage.”
Mr Devine stresses that ASU plans “vary” so it pays individuals to shop around or, better still, take advice.
