Get cover in case of involuntary redundancy - compare unemployment protection policies
Redundancy insurance is a type of short-term income protection cover. It’s also sometimes called unemployment protection insurance.
If you’re made redundant it helps to replace your wage with a tax-free monthly payment for up to 12 months.
Redundancy insurance can help to provide peace of mind when you have monthly expenses like mortgage repayments and bills to pay.
If you’re in permanent employment and have a family or financial responsibilities, redundancy insurance might be worth considering.
It could be particularly useful if you’re in a job where the chance of redundancy is medium to high, but losing your job is still likely to be three to six months away.
But you’re unlikely to be eligible if you work part-time, have been in your current role less than six months, are self-employed or work on a temporary contract.
You’ll pay monthly premiums and if you’re made redundant involuntarily during this time and make a successful claim, your redundancy insurance policy will pay out.
Most policies provide financial cover for up to 12 months and can pay 50-70% of your annual income before tax.
But for higher salaries, insurers will usually cap the total payout amount.
To make a claim, you’ll need to register as unemployed at the job centre and provide your insurer with the relevant paperwork.
It can take around 30 days to receive your first tax-free payment and you’ll continue to receive payments until you find another role or until the policy term ends.
When it comes to taking out financial protection for unemployment, there are a few options you can choose from:
Often taken out with a mortgage, this type of cover can help cover your mortgage repayments if you lose your job
This provides more comprehensive protection against situations that might prevent you from working
This type of protection will cover monthly payments on a loan or credit card if you find yourself unable to work
This provides standalone redundancy cover, but as these policies are increasingly hard to find a combined ASU policy may be a good alternative
This cover is designed to protect a proportion of your monthly salary if you lose your job unexpectedly.
It can cover you being made redundant as well as your company going into administration.
Paying out a tax-free monthly sum for an agreed period - typically 12, 18 or 24 months - it can provide short-term financial protection while you look for a new job.
Yes, you can also take out financial protection for other situations that might prevent you from working - for example, a serious illness or injury.
ASU insurance provides cover for these as well as giving you protection for redundancy.
This will vary between providers and will also depend on your situation and the options you choose.
For example, the price will depend on:
The older you are the higher your premiums. You’re more likely to be ill and off work as you age, so with ASU policies this increases the cost
The percentage of salary you choose to insure and whether you’re having a combined ASU policy will affect the cost
You can choose how long you’ll receive payments for - usually 12, 18 or 24 months - the longer this period is the more expensive your cover will be
A pre-agreed waiting phase that states how soon you’ll receive payments after you’re made redundant. A longer deferred period reduces your premiums
The exclusion period will be stated on your policy and it’s an agreed initial timeframe during which you can’t make a claim.
It could last up to six months from the day your cover starts.
If you’re made redundant during the exclusion period you won’t be eligible for any payouts.
This is designed to stop people taking out unemployment insurance when they know they’re going to be made redundant, or if they’ve been made aware that redundancy is likely.
Yes, the deferred period is how long you’re prepared to wait between the first day of your redundancy to when your payments will start.
You agree to this fixed period of time when you take out your policy.
You should consider any savings you have and what your redundancy payout might be to help you work out when you’d need the payments to start.
The longer the deferred period is the lower your monthly premiums will usually be.
You can only claim on your redundancy insurance policy if you’ve been made redundant and have lost your job unexpectedly.
You won’t be covered if:
Redundancy insurance is useful for unexpected job loss. But you’ll need life insurance if you’ve got family or dependents that rely on your income and you’d like them to have financial support when you die.
If you pass away during the policy term it can provide a tax-free lump sum they can use to help cover things like funeral expenses, mortgage repayments, and general living costs.
You’ll usually only be able to take out redundancy insurance if you’re in full-time employment.
And most insurers will require you to have been in your job for at least six months before you can buy a policy.
Redundancy insurance is generally only available if you’re in full-time employment.
There are specialist providers who offer insurance options if you’re self-employed, although you may need to prove your income.
If you’re self-employed you can still take out income protection for injury and illness to protect you against certain situations that might prevent you from working.
Jobseeker’s Allowance pays up to just under £75 a week, so it’s unlikely to cover your monthly outgoings.
Taking out unemployment protection can help to pay the bills and make up the difference if you find yourself unexpectedly out of work.
This will depend on the deferred period you agreed to when you took out your policy - this is usually up to six months from your first day of redundancy.
It’s possible to buy unemployment insurance policies that will pay out immediately, although you’ll usually need to pay higher monthly premiums.
No, if you don’t make a claim for redundancy by the end of your policy you won’t receive any payout.
No, because each policy is tailored to the individual, you’ll need to take out your own cover.
While it’s not easy to find redundancy insurance as a standalone policy, you can still take out combined ASU cover.
This can provide you with financial protection by insuring a percentage of your salary.
So, whether you lose your job or a serious illness prevents you from working, you can still receive tax-free payouts to help you meet your financial commitments