Unemployment Protection Insurance
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Unemployment protection insurance may sound intimidating, but it’s essentially a safety net for unexpected job loss. Like accident and sickness insurance, it’s a personal policy tailored to your situation, acting as a financial lifeline if you lose your job. Unlike accident and sickness insurance, though, unemployment protection insurance has been designed to safeguard you and your income against involuntary redundancy, which can turn your life upside down if you’re not prepared for it.
If you lose your job through no fault of your own, your policy will pay a monthly benefit – up to £2,500, depending on your income – for up to 12 months or until you find a new job, whichever happens sooner. Once you return to work, the payments stop, but the policy remains active as long as you continue to pay, ensuring you’re covered if you lose your job again.
How exactly does unemployment protection insurance work?
Make a claim if you lose your job
Unemployment protection insurance is a valuable safety net for anyone concerned about financial stability. It replaces 60-75% of your usual income if you lose your job through no fault of your own, such as via redundancy, providing invaluable peace of mind during one of the toughest times.
Receive ongoing financial support
After a short ‘excess period’ (chosen when you purchase the policy), your unemployment protection insurance provides temporary income to cover essential expenses while you find your next steps. Coverage typically lasts up to 12 months per claim.
Claim again if you have to
Even after the 12 months have passed, your cover doesn’t end. Once back in work, you’re free to claim again if you lose your new job in the future. Designed to provide lifelong support, unemployment protection insurance ensures peace of mind so you can focus on living, not worrying.
Do I need unemployment protection insurance?
Unemployment protection insurance is ideal for people who rely on a steady monthly income to cover essential living costs and lack a substantial savings cushion – which, let’s be honest, is most of us. It’s especially useful for people whose households and families rely on their finances to keep things moving. Workers in industries facing economic uncertainty (especially during the current AI boom), as well as homeowners with major financial obligations like a mortgage should definitely consider investing in unemployment protection insurance.
What does unemployment protection insurance cover?
What is covered by unemployment protection insurance?
Your unemployment protection insurance will generally cover you if you lose your job through no fault of your own (which usually means if your job loss is caused by company downsizing, restructuring, or redundancy).
Your payout is designed to replace a portion of your usual income (usually between 60% and 70%), which can then cover key expenses like mortgage payments, rent, utilities, and even your weekly grocery shop while you look for a new job.
You’ll only receive your payout if your insurer is certain that you bought the policy before you found out about any possible restructuring or downsizing happening at your workplace.
What is not covered by unemployment protection insurance?
Unemployment protection insurance has a number of exclusions, including:
- Voluntary redundancy
- Dismissal with cause
- Redundancies you were aware of at purchase
- End of fixed-term contracts
- Redundancies during your Initial Exclusion Period (the first 120 days of your policy)
For a full list of exclusions, check the policy documents you received when you purchased your unemployment protection insurance policy.
Types of Pet Insurance
There are several types of pet insurance coverage available, each offering different levels of protection and benefits. Understanding the differences between these coverage options is crucial in selecting the most suitable policy for your pet. The main types of pet insurance coverage include:
How much is unemployment protection insurance?
Unemployment protection insurance premiums are affected by a whole range of factors, which include:
Your age
Older policyholders can pay slightly more in unemployment protection insurance premiums due to statistically longer job search durations, though this is negligible
Your salary
Higher-earning individuals will usually take out unemployment protection insurance policies for higher benefit amounts, which naturally increases the cost
Your job
Jobs in industries with higher historical turnover, high redundancy rates, or economic volatility (like construction or retail) generally cost more to protect than others
Cover length
If you’re looking to cut costs, taking out a short-term policy is a good idea — but check how much cover you need first.
The waiting period
The longer you can wait before receiving your payout, the cheaper your premiums will be. Generally, waiting periods start from about 4 weeks and go up to a full year.
What are the benefits of unemployment protection insurance?
There are a number of benefits to pet insurance cover, including:
Your unemployment protection insurance provides regular monthly payouts if you are made involuntarily redundant, so you have your most important financial responsibilities covered
Offers financial stability during periods of unemployment so that you don’t have to rely solely on state benefits. This allows you to maintain your lifestyle and financial commitments during career transitions
Helps cover essential bills and financial commitments while you look for a new job.
Unemployment protection insurance can reduce the stress and uncertainty associated with sudden job loss, giving you the freedom to focus on securing new employment without immediate financial pressure
How much unemployment protection insurance do I need?
Working out how much unemployment protection insurance you might need is easy when you break it down into three quick steps:
Work out your monthly take-home pay and how much your usual monthly expenses are, including bills, rent or mortgage payments, and day-to-day costs
With that worked out, you then want to take away the amount of money you’d get in state benefits as well as any work-related costs (like the cost of commuting, for example)
Make sure to take into account any extra expenses you’d need to cover if you lost your job unexpectedly, like the cost of travel to-and-from job interviews
How much will my unemployment protection insurance pay out?
Income protection insurance policies generally cover just a percentage of your pre-loss monthly income. Every insurer is different, but as a general rule, an income protection insurance policy will cover between 60% and 70% of your gross monthly income. This payment is tax-free, so you’ll get the full amount that you agreed to when setting up your policy.
What do I need to get an unemployment protection insurance quote?
Once you’ve figured out what kind of unemployment protection cover you want, we’ll need some information about you, your occupation, and the type of policy you’re looking for.
Your personal
details
We’ll need info about you and your employment, including your name, age, and address, as well as the type of job you do and who your employer is. Don’t worry, though – we won’t contact them
Your income & cover details
To make sure we’re finding the right policy for you and your individual circumstances, we’ll need to know a couple things, like your annual income before tax and the amount of cover you want
Your chosen waiting period
Your waiting period is the amount of time you agree to wait before payouts begin (usually from 4 weeks to a year). The longer your waiting period, the cheaper your premiums
Frequently Asked Questions
Self-employed individuals can get unemployment protection insurance, but it’s more challenging than for traditional employees. Policies are tailored and usually require proof of income, such as tax returns or bank statements, to set the benefit amount. Illness and injury are more commonly covered, while unemployment coverage has stricter limitations.
The typical benefit period for unemployment protection insurance is up to 12 months, though many claims last less. Payouts depend on how quickly you find a suitable job based on your skills and financial needs. Your policy will continue paying until the 12-month limit, after which you’ll need to return to work or rely on savings.
Common exclusions in unemployment protection insurance policies generally include voluntary resignation, fair dismissal (for example, if you were made unemployed because of your conduct), pre-existing conditions (i.e. if you already knew you were going to lose your job when you purchased the policy), and unemployment during the IEP. For a more specific list of policy exclusions, please check your policy wording.
According to UK tax laws, any benefit you receive from your unemployment protection insurance is tax-exempt. That means that you won’t have to pay any tax on your benefit once you’ve received it, so you’ll get the full amount you’re expecting. Unfortunately, though, your premiums aren’t tax-deductible.
You can cancel your unemployment protection insurance policy whenever you like! All you have to do is contact your insurer, whose details you’ll be able to find in your policy wording. If you’ve only had cover for 30 days or less and haven’t made a claim/don’t intend to make a claim, you’ll get your premiums refunded in full. If you’ve been insured for longer than 30 days, though, or you intend to make a claim, you won’t get a refund in your premiums.
Yes, you will be covered if you lose your job through redundancy — in fact, situations like this are exactly what unemployment protection insurance has been designed to cover. If you’re made redundant, you’ll have to claim through your unemployment protection insurance policy like you would for any other situation.
How quickly you’ll be able to get paid will depend on how long of an excess period you’ve selected, as well as how quickly you’ve made your insurer aware of your job loss. Most claims will be processed in about 30 days, but your excess period can be as long as 90 days, depending on what you selected when you purchased your unemployment protection insurance policy. You’ll have to wait for your excess period to finish before you’ll receive any benefit payments.
Unemployment protection insurance may cover part-time or temporary workers, but this depends on the insurer and policy. These jobs are seen as higher risk, so coverage is rarer and has more restrictions. Some insurers offer coverage for part-timers working over 16 hours a week, while temporary workers may face more limitations but can still find coverage with certain insurers.
Unfortunately, most insurers don’t offer long-term unemployment protection insurance, because unemployment without cause (e.g. medical issues) should only ever be a temporary thing. If you’re interested in long-term cover, it might be worth checking out long-term accident & sickness insurance, which will pay out in the long-term if you’re taken out of work by an illness or injury.
No, pre-existing conditions are never covered by unemployment protection insurance. In this context, ‘pre-existing conditions’ refers to knowledge that you were going to lose your job at the time of purchase, which no insurer will cover.
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