The whole area of protection insurance is confusing, with a host of names describing insurance to cover debt repayment if you are unable to work because of accident, sickness or unemployment.

For the sake of brevity, we will confine ourselves here to basic accident, sickness and unemployment (ASU) policies. These usually pay out for about a year – perhaps two – and this distinguishes them from UK medical insurance, for example. Basically, they replace your earned income if you have to stop work because of accident, sickness or unemployment.

With ASU, the policyholder sets the level of income they wish to receive. You might just want to cover debt repayments, for example, or you may also want cover other expenses, which will of course put up the level of replacement income that you need and you need to factor this into your calculations as the premiums will inevitably rise.

The more you need to cover your costs if you make a claim, the higher the premiums will be, just as would happen with private medical insurance. However, bear in mind that there are now cheaper policies that will pay out for limited periods of, say, three to six months. Check the market to see which insurers offer these policies if they are more suitable for you.

You also have the option to cover just accident and sickness, or just unemployment, or all three. Note that there is an exclusion or excess period before the policy begins to pay out of, typically, 30, 60 or 90 days.

Treat this insurance with the greatest caution as it is usually expensive and the wealth of small print can hide some pretty tough exclusion clauses if you come to claim. These can include the insurer refusing to pay out if you have been dismissed because of industrial action, resignation or gross misconduct in the workplace.