Recent history shows us that unexpected redundancies can occur with little notice and for many reasons. Changing markets, a merger or acquisition, or just a restructure of a business to make things more efficient can create a difficult time for those effected, so many people believe it is good practise to be prepared. With the uncertainty of Brexit, the move online and the effects of past recessions still fresh in our minds you may like to consider covering yourself against the financial affect that a redundancy can bring.
Alternatively, you may have just taken on a new commitment such as a mortgage, or your landlord has juts increased your monthly rent payment. Perhaps you have purchased a new car, or taking a loan to consolidate some credit card debt? Perhaps you have had redundancy protection insurance before, and let it lapse and have decided that you just do not feel comfortable not having the necessary cover in place to make sure you have your income is protected against the truly horrible situation of losing your job.
If the answer is yes to any of the above, or if it is another reason entirely, then make sure you start researching your cover today. It really is a simple process and understanding the key points that you need to compare will help you choose the perfect redundancy protection insurance that meets your own individual circumstances. It's a wise decision to take control and get yourself protected as soon as possible, as once you have been made aware of any impending unemployment, you will no longer be eligible to claim.
What is redundancy insurance?
Redundancy protection insurance, or unemployment insurance, is an insurance policy that will provide you a monthly payment to replace your lost income should you lose your job involuntarily.
The monthly payment is tax free and will be paid to you directly on a continued basis until you find a new job, or if 12 months has expired. Whichever is the sooner. The policy allows you to cover a percentage of you monthly income, and it doesn't matter if you are employed, self-employed or a contract worker, as long as you are working and earning an income, you can and should protect yourself against unemployment or redundancy.
The policy continues with you until you reach retirement age, or the maximum age is 70, the policy renews automatically each year on its anniversary. The good news is that you are not tied in, and at any point and can cancel without fees or charges, however why would you cancel such an important policy?
Even if you believe your job is safe, or you have just had a promotion, it is extremely sensible to always have a redundancy protection insurance policy in place to cover your income and secure your salary against the unforeseen situation, that ultimately you have very little control over.
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Why redundancy insurance?
We insure most important things in our life, so why not insure your income against redundancy or unemployment? The car, the house, its contents, the dog, the cats, rabbits, our mobile phones, ourselves when we go on holiday, our life is also protected, at lot of people even insure their white goods like TV's, fridges, sofas, carpets against damage however you will be shocked to hear how few people insure their income against loss of job, redundancy or unemployment.
It really is difficult to understand why so many of us insure everything else but the one policy that will make sure that all the others are paid should you lose your job is lowest on our priority list. If you lose your job or are made redundant then how are you going to keep paying the bills and putting food on the table when you have very little income coming in.
Redundancy protection insurance will provide a monthly tax-free payment directly to you to replace your loss of income for a maximum of 12 months or until you return to work, whichever is the sooner. It will keep your life ticking over, your bills paid and your heating on, so you have peace of mind to concentrate on finding a new job without the added stress of worrying about your finances.
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How does redundancy insurance work?
Firstly, and most importantly, you need to be eligible to purchase the policy. Once this is established and you decide to purchase the most suitable policy for your circumstances, then you need to be aware of a few important points.
The initial exclusion period is unique to unemployment or redundancy protection. It is a one-off period that you need to go through from the day the policy starts. This period is specified within the terms and conditions of the policy you purchase, it could be 60 days, 90 days or 120 days.
If you are made aware your job is at risk or made redundant within this period, then unfortunately the policy becomes invalid and you must cancel your cover. Essentially the initial exclusion period stops you from buying a policy and claiming the next day for redundancy or unemployment.
Once the initial exclusion period has expired then should you be made redundant, subject to the normal criteria being met, you are eligible to claim. After you have chosen your initial exclusion period, you can then look at how quickly you would like your claim paid out, and how much you require.
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What does redundancy insurance cover?
This policy covers you against any loss of income which is caused by involuntary unemployment, or involuntary redundancy. It provides a list of reasons as to what you are covered for, and what you are not covered for.
For instance, you are not covered if you decide that you no longer enjoy working for your company or employer, and think that's it - I'm resigning, I'm off. This is considered leaving of your own free will, which is not covered. In the main, you are not covered if you are sacked due to any disciplinary or misconduct situations, as this is deemed as a situation where you have influenced the redundancy. Also, if you accept a redundancy package that your employer is offering that would again mean that ultimately, you have left of your own free will.
You are, however, covered if your company closes because of bankruptcy or liquidation, if there is a planned restructure that results in job losses, or if a merger took place and this meant that job losses and your position became redundant. Essentially, redundancy protection insurance covers you for the unforeseen involuntary redundancy or unemployment situations. Please speak to our advisors for more detailed information and exclusions if you are aware of your role being affected due to an impending re-organisation or re-structure at the time of buying your policy.
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Do I need redundancy insurance?
Are you working? Do you have a mortgage or rent to pay? Do you have credit cards bills or finance agreements that require paying? More importantly, could you survive on the government's Job Seeker's Allowance of just £68.00 per week?
Do you know that support for mortgage interest (SMI), which could be claimed by homeowners, is no longer treated as a benefit by the government? It will be treated as a loan, and therefore secured against your property with interest added, and it will become payable when you sell or re-mortgage.
Even if you have savings, why would you risk using your savings to pay bills each month? And in reality, how far will your savings go if you were unfortunate enough to be out of work for a long period of time? Buying an affordable redundancy protection or unemployment protection insurance policy will provide you with a monthly income, so you are not reliant on anyone else apart from yourself. Hopefully you will never need to use it, but if you do, it will be the most important few pounds you have spent.
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Types of redundancy insurance
There are two types of redundancy protection insurance: one that is linked to your income, and one that is linked to both your income and a financial commitment.
Linked To Your Income
You can purchase a redundancy or unemployment protection insurance that is purely linked to your income. This is the most flexible, as because the policy is based and linked to your income, it does not matter if you do not own your own home or have a mortgage. You do not even need to be renting or have any loans or bills in place, the policy allows you to purely protect your income.
Linked To Financial Commitments
The second is a redundancy policy that is linked to a financial commitment and/or commitments, as well as your income. For instance, if it is a mortgage linked product, you will need to have a mortgage and can only cover your mortgage payment. If it is linked to your rent, then you can only cover your rental payment. These policies can be slightly cheaper due to reduced risk.
If it is a commitment linked policy, then you can only cover your verifiable monthly commitments. For example, utility bills, insurance payments, council tax. Any policy that is linked to a mortgage, rent or financial commitment, you will need to be able to verify those commitments, as well as your income, at point of claim. This can be somewhat restrictive, and a reason why a redundancy or unemployment income protection policies are more flexible.
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Am I eligible for redundancy insurance?
It is very important to check you are eligible for your redundancy protection insurance. The criteria you need to meet does change dependent on the individual policy you decide to purchase, however there are some standard eligibility criteria which everyone needs to meet.
- You must be age 18 or over and you need to be under age 64.
- You also need to be a permanent UK resident.
- You must have been continuously employed for the last 6 months at point of purchase.
- You must not be aware of any impending unemployment or a risk you may become unemployed.
- You must not be subject to, or aware of, any disciplinary or misconduct procedures by your employer.
- If you are self-employed, you must not be aware of any reason that your company may close.
This is the base criteria that everyone needs to meet who is looking to purchase a redundancy protection insurance policy. If you meet this, then you can move forward with choosing a product that is individual to your own needs and requirements and start to look at the extra benefits and individual terms and conditions of the different policies that are available to you.
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When can I claim on redundancy insurance?
The reason that you purchased the redundancy policy in the first place was that you were worried about something, you wanted to know that at some point when you want to make a claim against the policy you can, that is the same with any insurance you purchase.
You can claim on the policy if you have been made redundant, however the redundancy must be involuntary. If at any point you are made aware of a possible redundancy, then you should immediately call the claims team. Their information can be found within the policy wordings. They will answer any questions you may have, and also record the information you provide them. In a lot of situations, the actual redundancy takes place weeks, if not months, after the initial notification, and it is always good practice to understand what the process is.
You do not need to wait until your last day, or until you have been made redundant. Be prepared and understand what you need to do to get your claim underway as soon as possible. For example, you may be in a notice period and working that notice, or being paid in lieu of notice, and by notifying the claims team they can start the process ready for when you finish.
Essentially, as soon as you are aware of a situation that could lead you to becoming unemployed or being made redundant you should start the process and discuss your individual situation with the claims team. All information and contact details of who you need to call can be found within the policy wordings.
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How much does redundancy insurance cost?
This really depends on your own personal circumstances and your own requirements. There are a lot of different redundancy protection policies available, with very different terms and conditions, and this can easily change the price you pay. A basic rule of thumb is that the price you pay will be dependent on a few basic rules.
he first is your age. The older you are the higher the cost, and whilst this is unfortunate, it is how it works across the insurance industry.
Initial Exclusion Period
If you choose a low initial exclusion period, which is the period of time after purchase that you can't claim, such as 60 days rather than 120 days, then the price will be higher.
If you would like the money paid to you quickly in the event of a claim, then again this will be dearer than taking a longer period to wait.
How much you wish to be paid each month will also increase the cost. You will be able to select up to 65% of your gross annual income, or up to £2,500.
To summarise, if you wish to cover the maximum amount available, with the lowest initial exclusion period, with the quickest pay out, you are going to be paying a higher cost than someone that would like a low monthly pay-out, with a long initial exclusion period, and who is also happy waiting longer before the money is paid out. Our team of trained insurance specialists will be more than happy to talk you through the process and find you the best price available. You can call us on 0330 330 9465 or request a call-back.
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How do I compare redundancy insurance quotes?
The very best place to start comparing unemployment or redundancy protection is online. All the information you could need, including pricing, word definitions and policy wordings, can all be found on this website.
Compare Your Options
First you should compare the initial exclusion period, as this is unique to redundancy protection insurance and should be the very first thing you compare. The next thing to look at is the excess period that is being offered, which is the length of time you have to wait until your claim is paid out.
Compare Benefits and Exclusions
You should also then compare the benefits and terms and conditions of the individual policies, does the policy offer any additional benefits, waiver of premium or the first month free or added legal protection or back to work support could be some of the additional benefits that could be offered.
Compare The Insurer
Finally, you should compare us, the company who is selling you the policy. Are they authorised and regulated by the financial conduct authority? Which insurers do we use, what are our customer reviews like, good or bad, is there any information on the claims that have been paid out?
All these points should be taken into consideration when comparing your Redundancy Protection Insurance policy. Hopefully after reading this guide, you will confident to move forward to and start comparing quotes. Get yourself protected today.
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