Compare redundancy insurance

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.

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.

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.

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.

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.

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.

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.

Unemployment cover can be standalone or part of accident, sickness and unemployment cover.

Learn more about specific policies that may cover Unemployment only; Accident and Sickness; and Accident, Sickness and Unemployment.

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.

Alternatively, start a quote for income protection now and look after what’s most important to you.