Is fear of redundancy making you too scared to call in sick?
How would you pay your bills if you were made redundant today? Or if you fell ill and couldn't work? It's a scary thought, but it happens. I personally know a few people who have been made redundant over the past few years as employers have tightened their belts.
The economic gloom is exacerbating the situation. Sports retailer JJB, for example, laid off 2,200 staff just this month after going into administration.
Workers are now so afraid of redundancy that they are going to work despite being ill, says a new report from the Chartered Institute of Personal Development (CIPD). According to CIPD, 'presenteeism' (going to work while ill) is worse in companies which are expected to make redundancies within six months.
The study of around 700 employers also found stress-related absences and mental health problems are on the increase.
The fear of redundancy may not be completely unfounded. According to CIPD, by the end of 2011 there were 460,000 fewer people in work than there was at the pre-recession peak of spring 2008.
If these are the kinds of worries that have you tossing and turning at night, you should know there are insurance policies which will pay out if you're unexpectedly made redundant or can't work because of sickness or injury.
Here's a closer look at accident, sickness and unemployment (ASU) cover, and whether it might be right for you.
How does ASU cover work?
ASU policies are designed to cover mortgage or loan payments or general bills if you're out of work through no fault of your own, for a maximum of one or two years.
Another form of insurance is Payment Protection Insurance (PPI). Here, the policy simply meets the cost of a specific debt so that you don't fall behind on your payments. The insurer pays you directly though, so you're still responsible for paying the bill yourself.
Mortgage Payment Protection Insurance (MPPI) would also usually be paid out to you directly, and then you'd be responsible for paying the lender. MPPI typically covers over and above your actual monthly payment amount (around 25% more) to allow for associated bills.
PPI has been at the centre of a mis-selling scandal. Banks have been found guilty of pushing unnecessary cover onto people, leading to massive compensation claims. But the fundamentals of the policy are sound - if you have a debt to service, it can make good sense to insure your ability to meet the repayments.
ASU policies are designed to be a relatively short-term safety net against illness or redundancy, and as such will only pay out for a limited period - usually between three months and two years. The longer the period of cover, the more expensive the policy will be.
Some policies let you decide how long you have to wait until payments start being made, so if you have a couple of months' pay tucked away in savings, for example, you can delay the start of you ASU payments by two months, and you'll get a cheaper premium in return.
Of course, it's not worth setting an unrealistic waiting period just to get a cheaper policy, because you might struggle to scrape by in the meantime. You might consider what's known as 'back to day one' cover, which backdates payment to the first day you were off.
There's also Short Term Income Protection (STIP) insurance, which replaces a portion of your income (50 or 60%) over a period of 12 or 24 months.
Things to consider
It's not worth buying ASU cover if redundancy is already on the cards at your place of work, as you can't buy insurance for a known event of this kind and the insurer would probably refuse to pay your claim.
Also, ASU policies won't pay out if you take voluntary redundancy.
If you are shopping for ASU cover then make sure to check the terms and conditions carefully to see what you would and wouldn't be covered for - especially if you're self-employed, on a temporary contract or only work part-time.
If, however, you think there's a chance of redundancies at your company around six months or more down the road, but there's been no indication or announcement to that effect, it might be sensible to buy ASU cover - particularly if you think you'd struggle to find a new job right away.
It pays to shop around for cover rather than simply buy from your mortgage provider or any of your other creditors. We have comparison services for PPI and MPPI, with a combined rage of 200 providers to choose from, so you can get a broad view of what's available.
What are the alternatives?
Remember that you'll get some form of sick pay if you're absent from work through illness or injury.
This varies from one employer to the next, but you'll at least be entitled to Statutory Sick Pay as long as you have average weekly earnings of at least £107 and you're off sick for at least four days in a row - including weekends and bank holidays, even if you don't normally work them.
The standard SSP rate is £85.85 per week, which is paid in with your wages as normal and is subject to tax and National Insurance contributions. For details on how to claim SSP, click here.
Then there's Statutory Redundancy Pay (SRP), which you're entitled to if you've worked continuously for your employer for at least two years. This should be paid automatically to you, and the amount you receive depends on your age, pay and length of service.
This calculator will give you an estimate of how much SRP you could expect if you were made redundant.
If your illness is more serious and means you can't return to work, income protection or critical illness cover might be more appropriate.
Income protection pays a monthly lump sum until you recover from your illness or injury, or until you retire. Critical illness cover will pay out a lump sum if you suffer from a major health problem, such as certain cancers or, for example, a serious heart attack.
Remember that your employer is unlikely to let you go for infrequent and genuine bouts of illness, but it never hurts to be prepared.
Please note: Any rates or deals mentioned in this article were available at the time of writing