Compare redundancy insurance
Due to the coronavirus outbreak, we are currently unable to offer comparison for Unemployment cover as some of our insurance providers are unable to provide cover. However, we are still able to offer comparison for Accident and Sickness cover.
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What is redundancy insurance?
Redundancy insurance, often called unemployment insurance, is a form of income protection that can pay out if you lose your job. Policyholders can be paid through a tax-free monthly income, which starts after a pre-agreed waiting period (sometimes called the deferred period). This type of insurance is often used to protect mortgage repayments, income or loan repayments, or your wages.
What types of insurance are available if I lose my job?
The three main types of redundancy insurance are:
- Mortgage payment protection insurance (MPPI). This is often taken out along with your mortgage and can pay out for up to 12 months after your earnings have ended.
- Payment protection insurance (PPI). This covers you in the event of accidents, sickness and unemployment, and you might already have it with a personal loan or credit card. It’s been well-documented that PPI was mis-sold in the past, but it can still be a worthwhile product if you’re worried about being unable to work.
- Unemployment protection. It’s also possible to get unemployment cover as a standalone policy. This can replace a proportion of your salary and typically pays out over a fixed period of 12 months or longer. However, please note that because of the COVID-19 pandemic, we’re currently unable to provide comparison for unemployment cover.
When should I consider buying redundancy insurance?
No job is for life, or completely secure, so income protection insurance needs to be considered on a ‘what if’ basis. If you’re working more than 16 hours a week and don’t have enough savings to cover you if you lost your job, you might want to consider buying redundancy insurance.
You’re not eligible to buy redundancy insurance if you already know your job is at risk. Policies also include an initial exclusion period of around three to four months. If you’re made redundant or find out your job is at risk during this period, you won’t be able to claim.
Frequently asked questions
Will my existing redundancy insurance cover me during the COVID-19 pandemic?
If you took out your redundancy insurance before the COVID-19 pandemic began, you should still be covered if you’re made redundant. However, you should check your policy wording to be sure, in case there are any exclusions mentioned. But, for the most part, your redundancy insurance was designed to protect you against situations just like this, so you should be covered.
To what extent do income protection policies cover redundancy?
Each policy will be different, but you can typically insure up to 70% of your pre-tax income on a monthly basis. The more money you need, the higher your premium tends to be. As a starting point, you should consider what exactly it is you’re looking to protect. Is it just for a mortgage, loan or debt repayment; or would you need to cover your salary as well?
It can be really quick to get quotes based on cover for mortgage payments and income.
When will a redundancy insurance policy pay out?
That’s largely up to you, although insurance providers can differ. Many redundancy insurance payouts come after a “deferred period”, which is agreed at the time you take the policy out. However, it is possible to get a policy that will pay out immediately, although these sorts of policies cost more in their monthly premiums.
This means you need to weigh up the pros and cons to your financial situation. If you have savings put away that will get you through a deferred period, then it might be better to save on your monthly premiums, but, if you’ll need the money right away to cover your important bills, then it could be worth paying more each month for that security.
How much of my income is covered?
This is up for negotiation. While it’s possible to get cover for up to 100% of your income, this is rare and can come with other limits. So, while you might get 100% income protection, this may be capped at a certain amount, which means it only makes sense for people who earn less than the cap.
In most cases, your income will usually be covered by about 50-70%. Again, there can be caps in place as to how much you can cover overall, so make sure you read your policy wording carefully and avoid any nasty surprises when you need the support most.
When should I avoid redundancy insurance?
If you have to leave your company because of misconduct, or you’re not retained at the end of a probation period, then an insurance provider won’t usually pay out. You also won’t be covered if you take voluntary redundancy or you resign from your job.
If you work for an employer, try to research what you would be due if you were made redundant.
If you’re a part-time or self-employed worker, or on a temporary contract, it’s also not likely you’ll be able to make a claim for a pay-out.
Check the terms and conditions carefully before signing up to any policy relating to redundancy, as you need to be clear on whether you qualify for a pay-out before you sign up.
How much statutory redundancy pay will I get?
If you’ve worked for your employer for two years or more, you’ll qualify for statutory redundancy pay.
How much you receive depends on your age, weekly pay and length of service (capped at 20 years).
- Aged under 22: You’ll receive half a week’s pay for each full year you were under 22
- Aged 22-40: You’ll receive a week’s pay for each full year you were 22-40
- Aged over 41: You’ll receive a week-and-a-half’s pay for each full year you were 41 or older
The limit is currently £525 a week (£547 in Northern Ireland) and the maximum statutory redundancy pay you can get is £15,750 (£16,410 in Northern Ireland).
As an example, if you were a 35-year-old earning £30,000 with two years’ service, you’d get just £1,050, plus your notice period – this wouldn’t last long.
How can I cut the cost of redundancy insurance?
You might be able to save money on redundancy insurance by increasing the deferred period. If you could live off your savings for a few months after being made redundant, you could delay your pay-out. You could also save if you’re willing to keep paying for your policy while you’re receiving a pay-out.
Above all, make sure you have the right level of cover in place. Income protection can typically cover up to 50% of your gross annual salary. But if you have savings to tide you over until you get another job, you could choose to cover a smaller amount. Your premiums will be cheaper and you’ll have a wider choice of providers.
What else should I think about?
Unemployment cover can be standalone or part of accident, sickness and unemployment cover.
Make sure you look into the details of each policy, not just the price. Why? Because they’ll be slightly different in what they do and don’t cover for redundancy. Also, the exclusions may be different and the length of the waiting period before you’re eligible for a pay-out, can also differ.
Before committing to redundancy insurance, it’s a good idea to learn more about life insurance too – and it could take just 3^ minutes to get a list of life insurance quotes tailored to you.
^On average it can take less than 3 minutes to complete a life insurance quote through Compare the Market, based on data in September 2020.
Alternatively, start a quote for income protection now and look after what’s most important to you.
What do I need to get a quote?
We can help you compare income protection insurance quickly and easily, so you can find the right level of cover to suit you. You don’t need any documents to get a quote. We’ll just ask you to answer a few questions covering:
- your name, age and address
- the type of job you do
- whether you’re employed or self-employed
- what sector you work in
- how long you’ve been with your current employer
- whether you’re a homeowner
- if you smoke or use nicotine-based products
- the deferred period you choose
- your health
- the amount of cover you want, based on your monthly income.
Why use Compare the Market?
^^^^ For the period 1st March to 31st May 2021, 9,781 people responded to the recommend question. 9,033 responded with a score of 6 or above, therefore 92.4% are likely to recommend
From the Life team
What our expert says…
“Being made redundant brings with it many worries, but the right protection can give you the peace of mind that you’ll still be able to pay your bills if you lose your job.”