A financial safety net
Get help covering your bills if you lose your job unexpectedly
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Unemployment insurance is a form of income protection that pays out if you become unable to work. This type of policy is often bundled with accident and sickness insurance.
Unemployment insurance policies may cover involuntary redundancy, also known as forced redundancy or compulsory redundancy.
This is when you are made redundant by your employer without having a choice in the matter, for example due to a restructuring.
This is different from voluntary redundancy, when your company is making redundancies and you volunteer to leave your role, often in exchange for a severance package.
Once you've taken out your unemployment insurance policy, you'll need to...
You won’t be able to claim on your policy as soon as you take it out. There’ll be an exclusion period, typically 90 to 120 days.
You can choose your exclusion period depending on your financial needs. For example, if you have savings to cover you for a while.
If you become unemployed and meet the policy terms, you can submit a claim.
Payouts start after you’ve been off work for a pre-agreed waiting period. This is sometimes called the deferred period.
Usually, the longer the waiting period, the lower your premium.
If you choose a longer waiting period, make sure you can manage financially while you wait for your payouts to start.
Once your deferred period ends, you'll receive a tax-free monthly income, usually for up to 12 months. However, some policies may pay out for up to two years.
ASU covers unemployment and sickness or injury for up to a year. You can add ASU to your unemployment cover for more comprehensive protection.
Critical illness cover could provide you with a lump sum if you’re unable to work because of a serious injury or illness that your policy covers.
Income protection insurance could offer a regular replacement income if you are unable to work due to illness or injury.
MPPI is designed to cover your mortgage repayments for up to a year if you lose your job or become unwell.
PPI is designed to help you keep up your loan repayments by paying out a set amount for up to 12 or 24 months. You may have taken out this type of policy with a personal loan or credit card.
If you’re an employed worker, there’s always the possibility of losing your job. If you don’t have a large pot of savings to rely on, unemployment insurance could offer financial support.
It could be particularly useful to have unemployment assistance if you:
Have a mortgage, loan or other debts to pay
Have children to support
Don’t have enough savings to draw on until you find another job.
Even if you have money set aside, you could find it runs out quickly when it’s being used to pay for your monthly outgoings, food shopping and bills.
If you think unemployment insurance is right for you, check the eligibility requirements, as they can vary among insurance providers.
Many require you to be in employment with the same employer for a minimum of 12 months before you can buy a policy. Before you buy, make sure you fully understand any exclusions on the policy.
Did you know?
There were 1.79 million unemployed people in the UK in July to September 2025, an increase of 282,000 from the previous year, according to Labour Force Survey (LFS) data from the Office for National Statistics (ONS).
Taking out unemployment insurance could provide you with a vital safety net if you lose your job through no fault of your own.
Policies will pay a tax-free monthly income if you’re made redundant
Monthly payouts can be up to 65%-70% of your monthly salary
Provides a financial safety net until you find another job
Can be bundled with accident and sickness insurance to offer even more protection.
It’s only designed for forced redundancy – you can’t claim if you’re fired, quit your job or take voluntary redundancy
It won’t pay out if you were aware of upcoming redundancies when you took out the policy
You can only start claiming after an exclusion period
It might not be available to the self-employed or company directors, who have more control over their own employment
You might pay premiums for many years but only be covered for a short period, such as a year, if you need to make a claim.
The cost of unemployment insurance is different for everyone, as it depends on your own circumstances and the options you choose. The amount you’ll pay for your premiums boils down to:
Level of cover – The more of your salary you want to cover, the higher your premium will likely be. So if you can manage on 50% of your salary, for instance, there’s no need to pay extra for a policy that covers more than this.
Length of deferred period – The longer your agreed waiting period, the cheaper your premium will be. But you’ll need to be able to manage financially before your payout starts.
Before you buy a policy...
Check if you're already covered. MoneyHelper says you may not realise you already have unemployment insurance because of how payment protection policies were sold in the past.
Ask your lender whether your mortgage, loan or credit card is covered by insurance. This might affect the level of unemployment insurance you need.
If you lose your job through no fault of your own, you may be able to claim Universal Credit to help with living costs while you're out of work. However, it's unlikely to replace your full salary.
Universal Credit is means-tested, so the amount you receive may be affected by any unemployment insurance payouts and savings you have.
If you've worked for your employer for at least two years, you may also be entitled to statutory redundancy pay. For each full year you’ve worked for your employer, you should get:
Half a week's pay for each year worked before age 22
One week's pay for each year worked between ages 22 and 40
One-and-a-half weeks' pay for each year worked from age 41 onwards.
Statutory redundancy pay is capped at 20 years' service. The maximum weekly pay is £719, with a maximum payout of £21,570. These amounts may not be enough to cover all your living costs.
If you were made redundant before 6 April 2025, these amounts will be lower.
You can estimate how much redundancy pay you could receive using the GOV.UK redundancy calculator.
Quick tip
Unemployment insurance could help bridge the gap between your benefits and your previous income. Alternatively, you could choose for your cover to start once your redundancy pay or emergency savings have been used up.
Explore income protection, redundancy insurance and how to cover your earnings if you're unable to work
After the deferred period specified in your policy, you’ll receive monthly tax-free payouts for the period set out in the policy – typically up to 12 months at the agreed level, but it may be for longer.
Some insurance providers may pay out a certain percentage on part of your income and a different percentage on the rest.
Unemployment insurance typically pays out a percentage of your income – usually up to 65%-70% of your monthly salary.
Depending on your insurance provider, you may be able to receive a higher percentage of your salary up to a certain amount – say £50,000 – then a lower percentage on anything above that.
It’s very unlikely that you’ll be able to cover 100% of your income, so you may need to top up with savings or tighten your belt until you’re earning again.
If your claim is successful, you’ll begin receiving payments as soon as the agreed deferred period has ended. The monthly payments will continue until you find another job or the claims period comes to an end.
You can buy unemployment insurance if you’re either full-time employed or you work part-time for at least 16 hours a week.
If you’re self-employed, you can buy unemployment insurance, but the circumstances in which you can claim are quite different from those of employees.
You can’t buy unemployment insurance online from us if you’re self-employed, but it’s worth speaking to an adviser if you’re considering this type of cover.
Find out what income protection is available if you’re self-employed
Unemployment insurance doesn’t cover you if you:
Quit your job
Get fired
Accept voluntary redundancy.
There’s usually an exclusion period, during which you won’t be able to make a claim.
The length of the exclusion period varies among policies but is typically between 90 and 120 days.
Some accident, sickness and unemployment policies may not cover you for pre-existing medical conditions.
To that end, it’s also important to be completely honest when taking out cover. Insurance providers are unlikely to pay out if they believe you withheld or falsified information when taking out your policy.
If you’re thinking about buying this kind of policy, you’ll need to think about the level of cover you’d need. Consider whether you need to protect:
Your mortgage
Loan or debt repayments
Your wages.
If you’re an employee, your employer may already provide some cover against accidents and illness. Find out what you’d receive if you were to be made redundant, so you know roughly how long you could last before needing some financial help.
It’s easy with our comparison service. Just fill in a few details about yourself and whether you’re interested in covering your mortgage or your income. We’ll then list your quotes in price order, with the cheapest at the top.
Price is a big consideration, but it’s important to make sure you get the level of cover you need too. By comparing a range of quotes, you’ll find the protection that’s right for you at a price that works with your budget.
It can do. Car insurance providers usually ask for your job title when you apply for cover. If you’re unemployed, car insurance providers may see you as a higher risk, and therefore quote you a higher price.
Tim Knighton is an expert in building and managing relationships with big brands for the benefit of customers, with more than 20 years of experience. He seeks out the right products that look after you and those you love most during the toughest times.
1 Based on Trustpilot ratings (July 2026).
What our expert says...
“Many of us don’t have the luxury of a financial cushion to fall back on if we’re made redundant. With unemployment insurance, you can get a monthly income to help you pay the bills.
"But if you work part-time, you’re self-employed or you’re on a temporary contract, read the policy very carefully before you buy as many payment protection policies won’t cover you.”