It is a type of income protection that pays you a monthly income if you lose your job. For example, you could claim on a policy and get an income until you can return to work if:
The company you work for goes into administration
You work for yourself and your business gets dissolved
Does it only cover unemployment?
You can choose to either take out a policy that only covers unemployment, or that also covers accident and sickness. You could also find cover for redundancy.
What isn't covered?
You will not get paid an income if you:
Quit your job
Get fired from your job
If you become unemployed due to misconduct, fraud or dishonesty, you will not be eligible for a payout.
Other reasons why an insurer will not pay out include:
You gave false information when you applied
Your claim is not covered in your policy
If you do not give accurate information about yourself when you apply for income protection, you could invalidate your policy.