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Protecting Yourself Against Financial Effects Of Unemployment

by Jim ONeil on March 20, 2011

in Personal Finance News

UK unemployment is at its highest level since the year 1994. Many workers are concerned about losing their jobs and want to protect themselves financially should they become unemployed.

During unemployment, they will likely not qualify for loans bank-issued. A solution is an insurance product that pays money to policyholders on a monthly basis should they be laid off from the job.

The first product is called ASU, which stands for Accident, Sickness, and Unemployment. The policy runs for a one-year period and pays a fixed amount over 12 months should the policyholder become unable to work due to layoff or health issues.

When people take out mortgages, credit cards, or loans, they are sometimes offered ASU called payment Protection Insurance (PPI). In this case, the payout covers interest payments on the linked credit card or loan, for a one-year period.

Premiums depend on the monthly benefit and deferral period. ASU is not valid if a layoff program has already been announced by the employer. Self-employed individuals face restrictions regarding the circumstances for claim approval.

In addition, premiums for ASU policies may increase annually upon renewal.

An Income Protection Policy is designed for those who cannot work for health reasons, but a rider regarding unemployment may be purchased. For health-related unemployment, payments occur until the person returns to work.

If the unemployment is due to a layoff, the payments cease after 12 months. Premiums are guaranteed for as long as the policy is held.

An Income Protection Policy payout will usually occur if the policyholder cannot perform his or her own job. With ASU, the payout is often only made if the person is unable to perform any type of work. In general, claims regarding back injuries or stress are usually rejected by ASU policies.

Aside from obtaining this insurance, paying off debt and saving money puts individuals in a better financial position.

wood roberghany

The short term effects are obvious. Savers are putting less cash into banks and property, and banks happen to be reluctant to give loan to subprime clients. This can produce a downturn in real estate market, and possibly the stock exchange will even decline temporarily.

The longer-term implications are not as easy to comprehend. If you think maybe the sub-prime market wasn’t sustainable, and individuals people shouldn’t happen to be purchasing houses, than the can create a permanently lower interest in housing. If you think maybe otherwise, then your market might determine an easy method of handling the potential risks.

admin

An interesting point Wood, thanks for contributing

Richard Baines

The short run effects are obvious. Savers are putting less money into banks and housing, and banks have been unwilling to lend to subprime people. This will create a slowdown in the housing market, and perhaps the stock market will also decline further.

The longer-term implications are harder to get to grips with. If you believe that the sub-prime market was not sustainable, and those individuals should not have been buying property, then this will create a permanently lower demand for houses. If you believe otherwise, then the market might figure out a better way of handling the risks.

Allan

The short run effects are clear. Savers are putting less money into banks and real estate, and banks have been unwilling to lend to subprime customers. This will create a slowdown in the real estate market, and perhaps the stock market will also decline temporarily.

The longer-term implications are harder to understand. If you believe that the sub-prime market was not sustainable, and those individuals should not have been buying houses, then this will create a permanently lower demand for housing. If you believe otherwise, then the market might figure out a better way of handling the risks.

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