What is Redundancy Insurance?

Find out more about Redundancy Insurance, to see how you could insure your income against the unexpected.

Redundancy Insurance is a type of income protection that covers you if you lose your job unexpectedly, through no fault of your own.

Also called unemployment insurance, it offers financial security in the short-term, helping you meet any essential outgoings in the event that your usual income suddenly stops.

If you’ve been in the same job for a long time, or are self-employed and running a successful business, you might not be sure whether you need Redundancy Insurance, but it’s impossible to predict what’s around the corner. In our increasingly turbulent economic climate, protecting yourself against the unexpected is more important than ever.

Benefits of Redundancy Insurance

Just like an old-fashioned rainy-day fund or an emergency parachute, Redundancy Insurance gives you peace of mind, making sure that even without a regular income you would still be able to support yourself and your family.

With the reassurance of knowing your income is protected, you’ll be free to focus your time and effort on finding the right job. This will also give you the space and flexibility of not having to accept the first opportunity that comes along because of financial pressures.

When you claim on Redundancy Insurance, you’ll receive a tax-free payment known as a monthly benefit amount, for up to 12 months in any one claim period.

How is the Redundancy Insurance claim paid?

The money you receive will be paid straight into your bank account and is designed to cover a portion of your wages or salary, but not the total amount. How much you receive depends on how much you earn and can be up to 65% of your gross monthly income (before tax).

Rather than replacing your salary, this type of income protection should pay out just enough to cover any essential outgoings – things like rent or mortgage repayments, household bills, council tax and food.

Because the money will be paid straight to you, it doesn’t need to be tied to any sort of financial commitment. You can use it to keep up with rent or mortgage repayments, but you don’t need to be a homeowner to purchase a Redundancy Insurance policy.

Once you make a claim and start receiving payment, you are free to spend the monthly benefit however you choose, whether that’s to cover loan or vehicle payments, a phone contract, or just everyday necessities.

Are there any limitations I need to be aware of?

It’s important to note that you don’t need to opt for the maximum benefit amount available to you. When choosing your cover, it’s always a good idea to calculate the minimum you’d need to meet your essential outgoings and work up from there if need be.

In the event of redundancy, most people find that they naturally cut back on anything that isn’t absolutely necessary, and so are able to survive on much less each month than they ordinarily would. When you purchase Redundancy Insurance, our advisors will take your financial circumstances into account to help find a policy that’s right for you, so don’t worry if you’re not sure of the exact details to start with.

Until what age can I buy Redundancy Insurance?

As long as you’re aged 18-64, a permanent resident of the UK, Channel Islands or Isle of Man and are working full-time (more than 16 hours per week), you could protect your income with Redundancy Insurance.

To be eligible for cover, you must be able to prove that you lost your job through no fault of your own, and that you weren’t aware of any possible redundancies or restructuring at your place of work when you purchased your policy. If you’re self-employed, the same condition applies, only in relation to your own business.

If you’re thinking about purchasing Redundancy Insurance, it’s important to keep in mind that these types of income protection will cover you for involuntary job loss or redundancy, but not voluntary. This distinction sometimes confuses people, but really it’s not as complex as it sounds.

To be eligible to claim, you just need to prove that you lost your job through no fault of your own, and that you haven’t accepted any kind of voluntary redundancy package.