Redundancy insurance: we’re spoken about it before. While the idea of income protection is appealing, many UK residents wonder if it really is worth the premium. Which is a very sensible question to ask. After all, you are still putting away a portion of your salary. Will you ever see it again? We’ve decided to explore the topic further for those who are unsure about whether this really is a good idea.
Redundancy insurance is also known as unemployment insurance – or redundancy cover.
And it’s designed for one thing in particular…
…to provide you with an income if you ever lose your job.
These days, redundancy is a common threat to any working person. We’ve all got bills to pay, but some have more than others. In addition, many may not be able to keep up with their mortgage repayments if they lose their jobs.
A clarification of redundancy insurance vs. other types of cover
The term “income protection” can be seen as something of a general catch-all. Income protection insurance can include unemployment insurance. However, disability and accident insurance also fall under this term. In most cases though, redundancy insurance is included – you’ll be covered for a wide variety of different situations which may leave you unable to work.
Taking out redundancy insurance is definitely a good idea. Especially if the stakes are high. But then we come to the idea of claiming. And this is often where a lot of people have big questions.
Before you make a claim…
Redundancy cover can help you when you’re in a tight spot. But just because you have a policy doesn’t mean you have to fall back on it straightaway. Your unemployment insurance should be used for situations where you really see no other way out.
Alternatives to redundancy insurance
Even if you have cover, don’t forget about the other safety nets you may already have. For example:
- If you get ill, your employer may offer you sick pay. Usually, this lasts for a couple of months. Afterwards, you may be well enough to work again and therefore won’t need to claim.
- If you’re given the boot for whatever reason, it may be worthwhile falling back on your savings. At least for a certain amount of time. In fact, some redundancy insurance packages may reward those who hold off before they claim.
- If you are offered a significant severance pay package, this may also help you for a few months before you claim on your insurance.
All in One: Unemployment insurance with general accident and disability cover
Most of the time, your unemployment insurance policy will cover more than just loss of income through redundancy. You’ll also be covered in the case of job loss through illness or accident. However, at this point we’d like to make one thing clear: always read your policy! This cannot be stated enough.
There is a lot of choice out there in the insurance market. So always make sure to compare and read policies before signing up.