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Redundancy Income Protection Insurance
What is redundancy insurance?
Redundancy insurance is a short-term protection that offers financial support if you lose your job involuntarily. It pays a percentage of your gross monthly income to help pay your bills until you find a new job. The amount is typically tax-free and may continue for up to 12 months, depending on your policy.
Who can get redundancy cover?
Eligibility for redundancy insurance in the UK can vary between providers. However, most insurers set these standard requirements and exclusions.
Who is eligible for this cover?
- Full-time employees with a minimum of 16 hours per week.
- Those who have been continuously employed for at least 6-8 months before the redundancy.
- People without prior knowledge or warning of redundancy or restructuring of their company before taking out the policy.
- Applicants who are not already under notice of redundancy.
- In some cases, applicants must be under the age of 65.
- The redundancy must be compulsory, not voluntary.
- Applicants must register as unemployed and actively seek employment after being made redundant.
Who can be excluded from redundancy protection insurance?
- Self-employed individuals.
- Directors, shareholders, or individuals with significant control or ownership of the company.
- Part-time workers, working less than 16 hours per week.
- Temporary, fixed-term, or agency workers.
- Those who opt for voluntary redundancy.
- Those who resign.
- Those dismissed for misconduct.
- People who are aware that their job is at risk at the time of taking out the insurance.
What does redundancy insurance cover?
Exact coverage varies across different policies and the protection you choose to include. Here are some of the common options and exclusions you can find on this coverage.
Usually covered
- Income protection insurance with redundancy cover replaces a percentage of your income for a set term if you lose your job involuntarily.
- It covers redundancy due to business restructuring, cutbacks, employer insolvency or administration.
- It offers a fixed, tax-free monthly payout, usually between 50% and 70% of your salary, typically for 12 months or longer, depending on the policy terms.
Typically not covered
- Voluntary redundancy.
- Resignations or dismissal for negligence or misconduct.
- Claims made during the policy’s deferred period.
- Redundancy due to circumstances known about before the policy was taken out.
- Self-employed, part-time, temporary, or agency workers.
- Unless included, loss of income due to illness or accident.
Types of redundancy protection
Standalone redundancy cover
Only covers income loss due to involuntary redundancy.
Accident, sickness, and unemployment (ASU) insurance
ASU insurance covers loss of income due to redundancy, as well as accident or sickness.
Income protection insurance
Income cover you if you lose your income due to illness or an accident. This does not include redundancy cover.
Payment protection insurance (PPI)
Focuses on specific payments like your mortgage or credit card payments if you lose your income.
How much does a redundancy policy cost?
The cost can vary because premiums are based on several factors related to your circumstances.
Your age
Younger people usually pay less as they have a lower risk of redundancy than older workers.
Your occupation and industry
Riskier sectors may have more layoffs, so they typically cost more.
Level of cover required
The percentage of your salary you want paid out will affect the cost.
Benefit period
Typically 12 months, although some may cover you up to 24 months. The lower your benefit period, the less you’ll likely pay.
Deferred/waiting period
Waiting longer for the waiting period before the policy starts to pay could lead to a reduced premium.
Optional extras & bundled coverage
Policies that include cover for other income risks like illness and accidents will usually cost more than a standalone redundancy policy.
How to get redundancy protection insurance?
We can help you find multiple redundancy protection quotes by filling out the form on our website. We only work with reputable insurers who can offer you customised quotes. Comparing quotes is a good strategy to help you find the policy that best suits your needs.
Redundancy insurance cover FAQs
What specific costs does redundancy protection reimburse?
How is the payment amount determined in redundancy cover?
How does the deferred period impact the payout process?
Does this insurance cover accidents or sickness?
Is redundancy insurance worth it?
Does income protection insurance cover redundancy?
Can you get insurance against redundancy?
What is the best redundancy insurance in the UK?
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