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Unemployment insurance is a type of income protection insurance policy. It is sometimes referred to as employment-protection insurance or work insurance.
This type of cover provides financial security if you become unemployed through no fault of your own. In this situation, your insurer would step in and pay you a monthly income.
Read more about income protection insurance
Unemployment insurance pays you a monthly income if you become unemployed through no fault of your own.
As long as you keep up with your monthly premiums, you’ll be able to claim on the policy if you become unemployed or are made redundant after an initial exclusion period.
When you make a claim, you usually need to provide identification and proof of address, along with evidence of your income such as payslips or confirmation from your previous employer. You may also need to list any financial commitments, including a mortgage, rent payments or dependants.
The two main kinds of unemployment insurance are:
Only covers unemployment.
Accident, sickness and unemployment
It covers periods when you're off work due to unemployment, illness or injury.
When you buy unemployment insurance, UK insurers might also include redundancy cover. This means you’d receive a monthly income if you were made redundant.
Unemployment insurance comes with two levels of cover:
Level cover: your payments and premiums are fixed for the term of your unemployment insurance policy
Inflation-linked cover: your payments and premiums increase each year, in line with inflation, until your policy ends
There’s also a choice of unemployment protection insurance premiums.
Guaranteed premiums: a fixed premium throughout the term of your unemployment cover.
Reviewable premiums: fixed premiums for a set term, such as 15 years. After that, you can review your policy and adjust the income payment. If you review your cover, it may affect your premiums
Income protection insurance policies pay out a percentage of your income, usually 50-70%. Often insurers pay out a higher percentage of a portion of your salary (perhaps the first £50,000), and a lower percentage on anything above that.
For example, say you earn £30,000 a year, and you take out an income protection policy designed to pay out 50% of your salary. Over a year, your policy will pay out £30,000 x 50% = £15,000, all of which is tax-free.
An income protection insurance policy typically lasts until you either return to work, retire, or die. But it depends on the specifics of your policy.
You can get also short-term income protection policies that last 12 or 24 months, which are generally cheaper.
You can apply for unemployment cover if you’re in full- or part-time work. You can also get income protection insurance if you’re self-employed.
You can apply if you have a pre-existing medical condition, although insurers might charge you more or exclude claims related to that condition.
Being made redundant can lead to significant financial issues if you don’t have the right unemployment insurance in place. The actual cost of losing your job will vary from person to person, so the cost of unemployment insurance will vary too. Comparing the policies available to you will help you better understand the costs.”James Andrews, Senior Editor, Personal Finance
To claim on your policy, you must have:
completed an initial exclusion period
met your premium payments during this time
been made redundant or unemployed involuntarily
Insurance providers usually insist on an exclusion period during which you can’t make a claim – typically between one and six months after purchase. This prevents people from getting unemployment insurance coverage when they know they’re about to be made redundant.
You can claim on your income protection insurance if the company you’re working for goes into administration. You can also claim if you work for yourself, and your business is dissolved. Your cover should function as a loss of earnings policy, allowing you to claim if you lose your earnings.
Income protection insurance doesn’t cover you if you quit your job or get fired. Nor will it pay you if you’re no longer employed due to misconduct, fraud or dishonesty, or if you give false information when you apply. Giving false information could also invalidate your policy.
Some unemployment protection insurance policies have a deferred period.
This means that you’ll need to wait for a specified period after making your claim before payments start. The longer this period is, the lower your premiums will be. You choose how long the deferred period is when you buy your unemployment insurance.
If you need to claim on your income protection insurance, your insurer will first send you any missed income, then keep paying you monthly until you return to work. You should put your claim in as early as you can – even if the deferred period means that you won’t be paid straight away – because it gets the claims process started so you can be paid promptly once the money is due.
Comparing unemployment insurance is straightforward - just follow these simple steps:
Choose the type you want: unemployment only or accident, sickness and unemployment*
Select a level of cover: level or inflation-linked*
Decide on the type of premium you prefer: guaranteed or reviewable*
Set how long you want your unemployment insurance to pay out for if you lose your job
Click the get quotes button at the top of this page and fill out the form.
Compare unemployment insurance to find the one you want.
We list quotes by price, but it’s always wise to get the best level of cover you can afford rather than simply opting for the cheapest plan
* You can find explanations of these terms under “What does unemployment insurance cover” above
The amount of income protection you need depends on how much you earn, along with your monthly outgoings.
To calculate how much cover you need, work out your monthly expenses – things such as mortgage or rent payments, credit card payments, utility bills and food expenses. The point of income protection is to not improve your financial circumstances but to get you through a difficult period and cover your most important expenses. This is the reason insurers only pay out a percentage of your income.
The lower the level of cover, the lower your premiums will be.
The overall cost of your insurance depends on various factors, including:
the amount of cover required
your personal circumstances
the initial exclusion period
the deferral period between making a claim and payments starting
Some insurers could offer to cover 100% of your income, but still set a maximum amount – for example, you might get 100% of your income up to £50,000 a year.
By comparing home insurance, you could save money on the policy. The best value income protection insurance will offer you the cover you need, at a price you can afford. Choose a cover plan from the best UK insurance companies and see the online discounts they offer.
We have always aimed to provide the best possible services to bridge the gap between our users and our clients. Over the years, we have been thrilled to be recognised by various prestigious bodies and organisations for those efforts.
Last updated: 17 May 2022