If you have a family, mortgage or other commitments you could face a financial struggle if you were made redundant.
Having to pay your bills whilst you are looking for a new job may be impossible if you don’t have savings or financial resources of your own.
So, making sure you have income protection redundancy insurance is vital if you want to make sure your income is protected.
What does an income protection redundancy policy do?
Unemployment insurance cover is designed to provide financial support if you have been made redundant.
It normally pays a percentage of your salary to you on a monthly basis until you return to work, or for a specified period (typically 12 months). This will allow you to maintain your mortgage payments and certain other living expenses while you are out of work.
You will normally not be able to protect yourself if you have already been informed that redundancy consultations are under way or if you have already been given your notice. However, if there is no direct risk of redundancy then you can make sure you are protected with income protection redundancy cover.
Similarly, it's unlikely a policy will pay out if you leave your job willingly, or if you are let go as the result of misconduct.
What to look for when you compare salary insurance redundancy cover
Not all salary protection insurance policies are the same and so it’s important that you compare cover before you buy.
Always check whether any restrictions or exclusions apply to an unemployment insurance cover policy. These may include minimum and maximum age limits for cover and, more importantly, maximum annual benefits.
An income protection redundancy policy will generally only cover around 50-60 per cent of your income and so if you are a high earner, finding a policy that offers a high percentage and a high maximum annual benefit is likely to be important.
You should also be careful to compare the ‘deferred period’ on your salary protection insurance. This is the amount of time that you have to wait before the policy will start to make payments after you claim and is typically 4, 13, 26 or 52 weeks.
If you have significant savings then you may be able to wait 26 or 52 weeks before your policy kicks in and this will make your premiums cheaper. However, if you need the policy to pay out quickly you should consider a shorter ‘deferred period’.
You will also need to consider how long the policy will continue to make payments for once you start to claim, whether you'll need to continue to pay the insurance premiums if you become unemployed, and if the policy will re-cover you once you return to work.
While comparing the cost of salary insurance redundancy cover is important, you should also make sure that you’re getting the most appropriate cover. For example, cheaper policies may have fewer benefits and you may have to wait longer before you can make your claim and this could leave you in a difficult situation.
