Compare redundancy insurance policies from leading UK insurers. Get cover if you’re made redundant and protect your monthly income.
Think of redundancy insurance (sometimes known as ‘unemployment insurance’) as financial protection for the moments when life doesn’t go to plan. If you lose your job through no fault of your own – like company restructuring, role elimination, or insolvency – redundancy insurance can help replace your income.
It’s important to know what’s not covered: if you’re dismissed for misconduct or resign voluntarily, you won’t be able to claim. That’s because redundancy protection is specifically designed for involuntary job loss.
Most policies come with an Initial Exclusion Period (IEP) – usually around 120 days – during which you can’t make a claim. This stops people from taking out cover when they already suspect redundancy is coming.
You’ll also choose a deferral period (sometimes called a ‘waiting period’). This is the time between claiming and receiving your first payout. Shorter waiting periods cost more; longer periods lower your premiums. The right choice depends on how long you can comfortably manage without financial support.
If you have dependents (whether that’s children, a partner, or anyone relying on your income) redundancy protection can provide invaluable peace of mind. Even if you don’t have any dependents, though, the stress of losing your income unexpectedly can take a toll. That’s what redundancy insurance is for; to give you a safety net so you can focus on finding the right next step.
The claims process is simple, even if it might seem overwhelming at first. After you’re made redundant, you’ll need to contact your claim administrator to make them aware. You’ll then need to submit a claim pack with evidence and details explaining the exact circumstances of your loss. Your insurer will begin by looking at your claim, which typically takes up to 30 working days. If approved, the countdown to your deferral period begins.
Once that waiting period ends, you’ll start receiving monthly payouts – usually for up to 12 months, though some policies extend to 18 or 24 months for an added premium. Payments stop sooner if you find a new job, which is a win-win either way.
Most policies cap monthly payouts at 65% of your income or £2,500 – whichever is lower. If you earn more and need additional protection, some people choose to take out more than one policy to bridge the gap.
Here’s what the claims journey usually looks like:
You notify your claims team about the job loss and provide a timeline, They send you a claim pack to complete, which often includes employer verification, You may need to share additional documents during the assessment., Once approved and after your deferral period, your monthly benefits begin and continue until you’re working again or your benefit period ends.
Your claims administrator will stay in touch during the process, mainly to check on your job-hunting progress.
The biggest thing redundancy insurance covers is exactly what it says on the tin: involuntary redundancy. But it also supports you when unexpected job loss happens for other reasons beyond your control, including employer insolvency. Contract workers can also benefit. If you’ve worked for a company under two years and your contract ends unexpectedly, redundancy cover can pay out for the portion of time you expected to continue working. If you’ve been at the company for more than two years, you’re eligible for the full standard benefit period, just like permanent employees.
Some situations fall outside the scope of redundancy protection. These include: Voluntary resignation, Dismissal for misconduct, Standard fixed-term contracts ending, Most self-employed scenarios (though there can be exceptions) If you’re unsure whether you qualify, it’s always worth checking with an advisor.
Standalone redundancy insurance focuses solely on involuntary unemployment. If you lose your job and it wasn’t your fault, you may receive monthly payouts (up to £2,500) while you find your next opportunity.
Standalone redundancy insurance offers up to 65% of monthly salary in monthly tax–free payments. Financial support every month while you’re not working. Peace of mind while job-hunting. Time to find the right next role. No claims limit for future redundancies. However, it won’t pay you if you resign from your job, are dismissed, or take voluntary redundancy. Less coverage than ASU insurance, which also covers illnesses and injuries. If you’re made redundant during your IEP, you can’t claim. If you take cover when redundancy is likely, you can’t claim. Harder to qualify if self-employed, on temporary contracts, or part–time.
Standalone redundancy cover is especially useful if you’ve got a mortgage, loans, or very limited savings. Sole earners and parents also often find this cover incredibly helpful because losing an income can put an entire household under pressure.
If you want wider protection, ASU insurance may be the better option. It still includes redundancy cover, but it also protects you if you can’t work due to an injury or illness. Because of this extra coverage, ASU insurance policies require a medical questionnaire. Pre-existing conditions are normally excluded from cover to ensure fairness and prevent being declined later when it matters most.
Accident, Sickness & Unemployment (ASU) insurance offers up to 65% of salary tax–free. Financial peace of mind. Time to recover without financial strain. Flexible options. More comprehensive than redundancy insurance. However, it has a limited benefit period (12–24 months). More exclusions (e.g., some mental health or back–related claims). No pre–existing condition cover. Premiums often rise with age.
ASU tends to be a great alternative to redundancy insurance for self-employed people – who often can’t qualify for standalone redundancy protection – as well as those in high-risk roles like construction where injuries or illnesses are both more common and more debilitating.
Protects your income if you lose your job through no fault of your own, including employer insolvency.
Receive up to 65% of your income (max £2,500 per month) to help cover essential expenses.
Several factors can affect how much your income protection insurance costs, including:
| Feature | Redundancy insurance | Income protection insurance |
| Redundancy cover | Yes | No |
| Sickness cover | No | Yes |
| Accident cover | No | Yes |
| Benefit period length | 12-24 months | Up to retirement age |
| Payout limits | £2,500 or 65% of income | £2,500 or 65% of income |
| Cover for self–employed | No | Yes |
| Cost | Lower | Higher |
Your income protection insurance policy covers your income if you’re too sick or injured to work or if you’ve been made involuntarily unemployed. You agree on an amount you’d like to be paid if this happens — called a ‘benefit’ or ‘benefit amount’ — and if you find yourself unable to work, you make a claim. Your benefit will cover whatever you need it to cover, whether that’s your mortgage payments, your rent, your bills, or even your groceries.
If you successfully make a claim on your income protection insurance policy, you’ll be paid out the benefit amount you selected when you first purchased cover. This will usually be up to either 65% of your income or £2,500.
Yes, income protection insurance is worth the investment, even if you are in the UK. With an income protection insurance policy in your back pocket, you won’t have to rely on your savings, state benefits like Universal Credit (which often aren’t enough to live off of for long), or handouts from loved ones to keep your head above water in the event that you couldn’t work. Think of it like paying into your rainy-day fund; one day, you’ll need it.
Redundancy insurance isn’t a one-size-fits-all product; like most insurance, it works for some people and doesn’t for others. If you rely on your income to keep you and your family afloat, then protecting that income in the event of redundancy is a no–brainer. On the other hand, if you have robust savings, for instance, you might be able to handle your finances in times of redundancy yourself. Everyone’s circumstances are different, just like everyone’s needs are different. If you’d like to know whether redundancy insurance is for you, give us a call on 0330 330 9465.
No, you can’t claim on your redundancy insurance straight away. You’ll have to wait out your Initial Exclusion Period (IEP) before you can claim, which tends to be about 120 days. If you’re made redundant during this time (or even just find out redundancies are happening at your company during this time), you won’t be able to claim at all.
Yes, you can cancel your redundancy insurance whenever you like. If you cancel within the first 30 days of your policy and you haven’t made a claim in that time, your premiums will be refunded in full – a time known as your ‘cooling–off period’. If you cancel after that, though, you won’t be able get a refund – but you’ll still be able to cancel at any time.
Your redundancy insurance payments might be considered income when calculating your Universal Credit entitlement, which could affect how much you receive in benefits.
Yes, redundancy insurance payouts are tax–free, so you’ll receive exactly as much as you’ve selected when purchasing.
No, you can’t buy a redundancy insurance policy if you’re aware that your job is at risk. Any risk you’re aware of when purchasing is considered ‘pre–existing’ and will not be eligible to be claimed on.
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