Unemployment insurance, or employment protection insurance, is a type of income protection insurance policy. Unemployment cover acts as insurance for unemployed periods, so if you lose your job, your insurer would pay you a monthly income.
Read more about income protection insurance.
What does unemployment insurance cover?
You can choose unemployment protection insurance, which covers unemployment only. Or you can get accident, sickness and unemployment insurance which covers a lot more.
When you buy your unemployment insurance, UK insurers might also include redundancy cover. This means you’d receive a monthly income if you were made redundant.
How does unemployment insurance work?
Unemployment insurance, also sometimes known as work insurance, pays out a monthly amount if you become unemployed through no fault of your own. Unemployment protection insurance usually requires an initial exclusion period.
As long as you keep up with your monthly premiums, you will be able to make a claim on the policy if you become unemployed or are made redundant.
When you make a claim, you will 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.
Unemployment insurance eligibility
You can apply for unemployment cover if you’re in full-time or part-time work. There’s also job loss insurance for self-employed people.
You can also apply if you have a pre-existing medical condition. But insurers might charge you more, or exclude claims that relate to that condition.
After you buy your unemployment insurance, UK providers usually insist on an exclusion period. During this period, you can’t make a claim. The exclusion period is usually between one and six months. It stops people from getting unemployment insurance cover when they know they’re about to become redundant.
You’re able to 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, meaning you can claim if your lose your earnings.
Income protection insurance doesn’t cover you if you quit your job, or get fired from your job. If you’re unemployed because of misconduct, fraud or dishonesty, you won’t receive a payout from your insurer.
Your unemployment cover company won’t pay out if you give false information when you apply, either. Giving false information could invalidate your policy.
How to compare unemployment insurance
It’s easy to compare unemployment insurance, UK wide. Just follow these simple steps.
Consider which type of unemployment protection insurance you want. You can choose between level cover and inflation-linked cover. You’ll find more information about these below, in the section titled ‘unemployment insurance premiums’.
Decide whether you want unemployment protection insurance with guaranteed premiums or reviewable premiums. You’ll find more information about these below, under ‘unemployment insurance premiums’.
Think about whether you want unemployment cover on its own. Or you might prefer the peace of mind that comes with more extensive accident, sickness and unemployment insurance.
Consider how long you want your unemployment insurance to pay out for if you lose your job.
Then you can start looking at income protection providers. Click on ‘get quotes’ at the top of this page and fill out the form, giving details about yourself and your current employment.
The information you give means we can give you the best options, including cover from a variety of unemployment insurance UK providers.
Compare unemployment insurance, UK providers and policies from the options given to find the one you want. We’ll list them by price, but it’s always wise to get the best level of cover you can afford.
Unemployment insurance length
An income protection insurance policy typically last's until you 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 usually cheaper.
Unemployment cover premiums
Level cover means your payout and premiums are fixed for the term of your unemployment insurance policy.
Inflation-linked cover means your payout and premiums go up each year, in line with inflation.
Guaranteed premiums mean you’ll pay a fixed premium throughout the term of your unemployment cover. But, if you have inflation-linked cover, your premium and payout will increase each year until your policy ends.
Reviewable premiums mean you’ll have fixed premiums for a fixed term, such as 15 years. After that, you can review your policy and adjust the income payout. If you review your cover, it can of course affect your premiums.
Unemployment cover payout
Some unemployment protection insurance policies have a deferred period on them. This means that you won’t be paid straight away when you make your claim. You’ll have to wait for a set period before payments start. The longer this period is, the lower your premiums will be. You decide on 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 send you any missed income. Then they’ll keep paying you monthly until you return to work. You should put your claim in as early as you can, to get the claims process going.
What is that maximum benefit from an income insurance policy?
Income protection insurance policies pay out a percentage of your income, usually 50% to 70%. Often insurers may 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 the course of a year, your policy will pay out £30,000 x 50% = £15,000, all of which is tax-free.
How much income protection do I need?
How much income protection you need depends firstly on how much you earn, and secondly your monthly expenses or bills.
To calculate how much cover you need, list your monthly expenses 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 why insurers only pay out a percentage of your income.
The lower the amount of cover, the lower your premiums will be.
How much is unemployment insurance?
In order to claim on your unemployment insurance policy you will need to have completed an initial exclusion period, met your premium payments during this time and then been made redundant or unemployed involuntarily.
Therefore the overall cost of your insurance will depend on how long you are paying monthly or annual premiums before you are eligible to make a claim.
Having your job made redundant can lead to significant financial issues if you do not 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.