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The Importance of Redundancy Insurance

If one thing seems certain in the troubled economic times facing most of the world’s economies at the moment, it is that very few jobs are as secure or free from the risk of enforced redundancy than they have been in the past. This is undoubtedly true in the UK, which is experiencing a current rush by those presently in work for redundancy insurance.

This is a particularly useful - yet eminently affordable - insurance that guarantees an alternative, replacement monthly income in the event of the policy holder being made compulsorily redundant. Even if the worst should happen, therefore, and the regular pay cheque from an employer suddenly disappears, there is for most householders still enough coming in to pay the bulk of the household bills and expenses.

Just how much of the normal, earned income is covered in this way is very much up to the individual policy holder, who decides in advance what proportion of his or her salary needs to be insured. With most forms of unemployment insurance this can be up to 50% of regularly earned income or £1,500, whichever is the lower amount. The specific terms and conditions of various policies will differ, of course, from one insurer to another, so these limits can also vary. However, all payments from a redundancy insurance policy will be tax free.

A further difference between the various redundancy insurance policies on the market is on the maximum length of time for which the monthly benefits will be payable during any one period of involuntary unemployment. Although some (more expensive policies) will offer payouts for up to 24 months, the most typical time limit is 12 months. This should give the average worker enough time to find alternative suitable employment.

Benefits will typically start to be paid to the policy holder anywhere between 30 - 90 days after they are made unemployed. This will depend on the individual provider’s policy details, so it is imperative that anyone taking out unemployment cover is aware of when they would start to receive benefits in the event that they needed to make a claim.

One benefit to look out for, which not all policies provide, is back to day one cover. This is where the benefits are back paid to the first day of the claim after the 30 day waiting period. This ensures that the policy holder can take full advantage of the cover.

The cost of the redundancy cover should be investigated too by shopping around. Like the policy features and benefits can vary, so too can the cost - to quite a wide degree. Typically the independent brokers tend to offer cheaper unemployment cover than their contemporaries on the high street, with it often costing just a few pounds a month for every £100 worth of protection required.

Redundancy insurance provides a highly dependable, simple and straight forward way of securing a replacement income in the event of involuntary unemployment and can go a long way to ensuring that personal finances are kept fully in order during the interval between losing one job and finding alternative employment.

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