ASU is insurance that pays out up to a fixed amount or 75 per cent of your income less State benefits if you are unable to work because of sickness, accident or unemployment. Also available in its constituent parts. Called mortgage payment protection insurance (MPPI) if you buy it to protect your mortgage payments. The policy pays after a 1-3 month waiting period and pays out for up to one or two years only.

Do I need it? This type of cover is most valuable when you have just taken out a loan, especially if your loan payments make up a high proportion of your income. Accident cover is useful if you are at higher than average risk of having an accident. But if your job is dangerous or you take part in dangerous activities you may not be able to get cover. Sickness cover is useful but the real danger is long term illness. However, ASU can be combined with income protection (see Income protection section) to provide a more or less seamless short and long term benefit. Unemployment cover is particularly useful if there is any risk that you might be made unemployed. If you run your own business, most policies will pay out if your business goes into liquidation, but not if you do so voluntarily.

Tip If you are self-employed; a company director; a part-time worker or on a short-term contract check the policy cover carefully as you may not be covered if you lose your job.

If you are unable to pay your mortgage, the State now expects you to be able to make payments for at least the first nine months off work yourself. State benefits only kick in after that and even then you may not be entitled if your partner works.

Buying ASU When you take out a mortgage, your lender or mortgage broker will probably try to sell you ASU. Always shop around - if you want this type of cover, you can often buy direct or via a broker more cheaply than through your lender. Some deals give you three months free cover or increase your sum assured by 25 per cent so that you could afford to pay bills as well as your mortgage costs.

Tip Cover is not cheap so keep it under review. After a year or two, many people decide that they no longer need the cover.

Claiming under ASU If you need to claim, the insurer will need documentary evidence of your sickness, disability or unemployment. Make sure that you read your policy conditions before you claim to make sure that your claim is a valid one.

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