Unemployment Income Protection Insurance

Very few people now have ‘jobs for life’. Unemployment can be a real threat, but you can insure against the loss of your income

Robert Drury


Unemployment Income Protection Insurance

Very few people now have ‘jobs for life’. Unemployment can be a real threat, but you can insure against the loss of your income

The fallout from the credit crunch and UK austerity measures brought into  focus the increasing need for insurance against redundancy. Fortunately, unemployment income protection insurance is available. This affordable insurance product is designed to provide temporary financial support in the event of losing your job.

Unemployment income protection insurance for your mortgage payments

Those with a mortgage should seriously consider taking up such protection from outset.

Unemployment income protection insurance policies have been around for many years, although mainly confined to those taking out a mortgage. They are commonly known as ‘ASU’ policies – covering Accident, Sickness and Unemployment.

Many ASU policies require you to be taking out a mortgage or rearranging one to qualify for cover. So what about those who don’t have a mortgage?

Stand-alone unemployment income protection insurance

Stand-alone unemployment income protection insurance is now available for those who want to protect some or all of their income against the risk of redundancy. They do NOT have to have a mortgage to protect.

There are limits as too how much you can insure for as there has to be some incentive to find another job. Therefore, the reduced income, even with insurance, is seen as a way to ensure you will look for new work. There are usually waiting periods  following a plan starting before a claim can be made. This prevents someone taking out cover suspecting redundancy may be looming – insurers need to protect themselves against early claims.

How much does unemployment income protection insurance cost?

The cost of stand-alone unemployment income protection insurance depends on a number of factors:

  • Your age:  Some plans charge more based on age, because advancing age tends to bring more illnesses.
  • The level of cover you need for redundancy income protection insurance: Plans are usually priced at a rate per £100 of monthly benefit.
  • How long you want benefits to be paid for: This is usually restricted to a maximum of 12 or 24 months.
  • The length of time you could wait for a claim being paid by your redundancy income protection insurance plan. The usual minimum waiting period is 30 days before you can claim. In some cases the benefit can be backdated to the first day out of work. Other waiting periods available are 30, 60 or up to 180 days.
  • Whether you take an initial ‘free’ period of cover – e.g. 3 months. You will however pay a higher premium after the free period ends.
  • Occupation: some plans charge more for occupations they consider more at risk.
Other restrictions

The benefits will only commence from the day you are officially redundant, not the day you take garden leave or holidays owed. Because the cover is for being totally out of work, for claims to continue you must not do any kind of paid work – even for a day. Registration for work at a Jobcentre Plus office is essential and claimants must actively be looking for work.

An important warning: read the small print of your unemployment income protection insurance policy summary. Most importantly many claims can be declined on technicalities, and you should fully understand the restrictions and clauses before taking the contract out.

INCOME PROTECTION (WITH NO INVESTMENT LINK) HAS NO CASH IN VALUE AT ANY TIME AND WILL CEASE AT THE END OF THE TERM. IF YOU STOP PAYING PREMIUMS YOUR COVER MAY END.

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