Redundancy insurance, also referred to as unemployment protection insurance, is a protection policy that can pay you a tax-free benefit if you are made redundant involuntarily.
ActiveQuote are specialist redundancy insurance brokers and can help you compare redundancy insurance policies online to help you find a policy that meets your budget and needs.
How does redundancy insurance work?
Redundancy insurance is an income protection policy that provides financial cover for up to 12 months following involuntary unemployment.
If you have been made redundant involuntarily you should provide your insurer with any relevant documents needed to confirm your claim to receive your tax-free monthly benefit.
Based on your policy there may be a waiting time until you can receive your first payment. Typically this waiting time will be 30 days but you can choose a back-to-day-one policy that pays you after 30 days but then back dates payments to the day you were made redundant.
You can also increase your waiting period to reduce your monthly premium, for example if you had enough savings to cover two month’s salary and you were happy to use these savings to cover your income then a policy with a 60-day waiting period may suit you better.
Why do I need redundancy insurance?
No one likes to think about being made redundant but with an average 1,300 redundancies made each day in the UK1 redundancy insurance may be worth considering.
If you are made redundant you can find yourself struggling to meet your mortgage repayments or rent payments and government support could prove insufficient.
As of April 2014, the maximum a person can claim for Jobseeker’s Allowance is £71.70 a week2 but this could be even lower, depending on your circumstances.
If you think that government support would not sustain your lifestyle and cover the costs of utility bills, council tax, internet and TV contracts and food and clothes shopping then redundancy insurance can provide peace of mind.
What does redundancy insurance cover?
When considering a redundancy insurance policy you can select how much of your gross income you would like to insure. Insurers will let you cover up to 65% of your gross annual income.
Many people take out redundancy insurance to protect:
- Mortgage repayments or monthly rent
- Council tax and utility bills
- Internet, TV, phone and gym contracts
- Food and clothes shopping
- Maintain current lifestyle including holidays and leisure activities
Things to consider with redundancy insurance
Redundancy insurance is designed to cover an unsuspected unemployment situation such as involuntary redundancy. It is important to be aware of any exclusions regarding your unemployment insurance plan.
For most insurers, to qualify for successful claim on redundancy insurance you must:
- Be in continuous employment with the same employer for a minimum of six months
- Wait for a pre-agreed amount of time after you take your policy out to make a claim
- Actively be looking for a new job whilst you are claiming
- Have been unaware that redundancy was imminent or suspected as such
- Be made redundant involuntary – dismissal, voluntary redundancy and resigning are not eligible reasons to make a claim
Compare redundancy insurance quotes online
ActiveQuote can compare quotes on redundancy insurance online and by speaking to a product specialist you can tailor your policy to meet your budget and needs.
Many people choose to include accident and sickness cover in their income protection insurance policy but you can buy standalone unemployment cover if you wish.
ActiveQuote are fully authorised and regulated by the Financial Conduct Authority (FCA) to answer questions and offer free advice on redundancy insurance.
1 Office for National Statistics, 2014
1 Jobseeker's Allowance (JSA), GOV.UK, 2014