Unemployment Insurance

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Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

 

Why Unemployment Insurance?

Unemployment Insurance, also known as Redundancy Insurance, will pay you a monthly income should you get made redundant from your place of work.

 

Unemployment Insurance covers you if you suffer forced redundancy.

 

Designed to cover expenses such as your 🏠 mortgage payments and bills until you are able to find another job.

 

41% of employees have been made redundant or suffered long term ill health during their working life. Met Life 2012

 

Speak to our expert independent advisers or compare quotes from the UK’s top insurance providers online.

What is it for?
 

What Does Unemployment Insurance Cover?

Redundancy Cover

The policy will payout should you suffer forced redundancy. The payout length for unemployment cover is usually 12, 18 or 24 months. As such, they only offer short-term cover.

The policy will begin to pay a claim after your chosen deferred period and will continue to pay you a monthly income until either you return to work or reach the maximum benefit period.

Dismissal
Some policies also pay out if you are dismissed from your job, although this is less common. It is best you speak with one of our experts to understand which policies offer this additional protection

What does it cover?
 

How Does Redundancy Insurance Work?

  • You are made unemployed.
  • You register as unemployed with the Job Centre and start claiming Job Seekers Allowance (if you’re eligible for it).
  • Your insurer will assess your unemployment claim and start paying out your monthly benefit after your deferred period.
  • Your policy will continue to pay out either until you start a new job or reach the maximum number of payouts which could be either 12,18 or 24 months depending on the terms of your policy.

With Redundancy Insurance, should you be made unemployed again in the future, you would be able to claim again in the same manner you did the first time round. There is no limit on the number of times the policy could pay out.

How does it work?
 

Do I Need Unemployment Insurance?

We are all optimists at heart, but when it comes to our financial protection it is important we know all the facts to ensure we can weigh up the risks and make the right decisions.

The Unemployment Risk: 7.8% of people were unemployed in February – April 2013 according to ONS statistics.

The Consequences: Job Seekers allowance is a maximum of £73.10 per week which means that someone on a salary of £30,000 could suffer from an 87% fall in weekly income.

The Question: If you lost your income, how would you continue to meet your essential monthly outgoings if you didn’t have any Unemployment Insurance?

Do I need cover?
 

Your Key Options

Choose your level of cover
Some insurers will look at covering a percentage of your monthly income whereas some look to see how much your mortgage payments are and cover them plus an additional percentage.

Choose your excess period
You can opt for a policy which will pay out after 30, 60 or 90 days of unemployment. Some policies will pay you back pay of a month when you claim.

Choose your payout length
Unemployment plans are designed to protect against short term loss of income due to redundancy and thus tend to have a maximum claim period of 12 or 18 months.

If all these options seem a little overwhelming and you would like some support please do not hesitate to pop us a call on 02084327333 or email help@drewberryinsurance.co.uk.

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This Guide

Andrew Jenkinson - Drewberry
Written by:
Andrew Jenkinson
Director at Drewberry
⏰  10 min read
 

What is Unemployment Insurance?

Unemployment Insurance provides cover in the event of forced redundancy. Should you unexpectedly be out of work the policy would pay you a tax-free monthly benefit until you have returned to work or the policy has paid out for the maximum benefit period, which is often 12 or 24 months.

You can opt to include accident and sickness cover in your plan to ensure you are financially protected should you lose your income due to ill-health, accident or redundancy.

Rauri was easy to talk to. Explained everything really well. Took prompt action when requested and was in touch when he said he would be without being pushy.

Robert Eldridge
07/06/2018
Redundancy Insurance will pay you monthly benefits while you are unemployed.

How Does Redundancy Cover Work?

Unemployment Insurance provides cover in the event of redundancy. Should you unexpectedly be out of work, these policies pay you a tax-free monthly benefit.

The benefit you receive from this insurance will cover your essential living expenses and bills until you have returned to work or the policy has paid out for the maximum benefit period, which you will determine at the start of the policy as either 12 months or 24 months.

Redundancy Cover and Job Seekers Allowance
  • Step 1: You are made redundant by no fault of your own.
  • Step 2: You register with your local job centre as unemployed.
  • Step 3: You contact your insurer and make a claim.
  • Step 4: Your insurance provider accepts your claim and begins sending you monthly benefits after your deferment period.
  • Step 5: You can continue to receive benefits until you return to work or your payment period ends.

If you are made unemployed you will need to register with the Job Centre and potentially start claiming Job Seekers Allowance (if you’re eligible to do so). You will need to submit a claim with your insurer, they will then assess you circumstances. Assuming the claim is successful, the insurer will then start paying you the agreed monthly benefit to replace your lost income.

Your claim will continue either until you find a job and return to the workplace or you reach the end of your claim period which. This will have been defined as either 12, 18 or 24 months when you set up the policy.

 

What is Not Covered by Redundancy Insurance?

The standard exclusions will vary from insurer to insurer. However, the vast majority have a few general exclusions which are consistent across the board. The most common exclusions are detailed below:

  • You have become voluntarily unemployed
  • You have chosen to take a career break
  • You become unemployed due to your own misconduct, fraud or dishonesty
  • Your unemployment is the result of industrial action

You are unlikely to get cover in the first place if you are a temporary worker.

Do you get Income Protection from your employer?

If you are part of a Group Income Protection scheme provided by your employer, it may be worth taking out Unemployment Insurance as a standalone policy, which will exclude cover for accident and sickness.

If you do not receive Income Protection cover from your employer (as part of an employee benefits package) then it is well worth considering including accident and sickness insurance in your plan.

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If you're lacking in savings, Unemployment cover can help you cover your monthly expenses.

Do I need Unemployment Insurance?

While it might be unpleasant to think about potential misfortunes in our future, it is important to be prepared. In the 2017 Drewberry Survey, 28.2% of people had less than £500 in cash savings to fall back on, which is why Redundancy Insurance can prove a worthwhile product to consider to protect your family and finances.

UK Cash Savings

For many people, Jobseeker’s Allowance is not enough to provide them with enough of an income to maintain their current lifestyle.

In August 2017, the average weekly wage in the UK was £476. However, the maximum that you can get from Jobseeker’s Allowance is £73.10 per week. That is a salary drop of almost 85% for people earning the average UK weekly wage. For people earning more than the average wage, this drop in salary could be even more devastating.

Sam Barr-Worsfold, Independent Protection Expert at Drewberry

Due to the considerable gap between people’s earnings and their JSA entitlement, there is a strong possibility that individuals who are unemployed for more than a few months may struggle to manage their finances.

Falling behind on bills, such as mortgage payments, will have a massive impact. For that reason, it is important to consider how you might afford your lifestyle if you were suddenly made redundant.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

UK Unemployment Statistics

According to figures from the Department for Work and Pensions there were over 370,000 people claiming incapacity benefit in August 2009, and in this same month figures from the Office for National Statistics (ONS) show there were over 1.6 million people claiming Jobseeker’s Allowance. In this light, assuming that ‘this won’t happen to me’ is a large financial risk.

Everyone potentially has the need for Unemployment Insurance as job security can never be guaranteed but those who have an Income Protection plan provided by their employer as part of their employee benefits package may not need accident insurance or sickness insurance.

The Unemployment Risk
7.8% of people were unemployed in February – April 2013 according to ONS statistics.

The Consequence
Job Seekers allowance is a maximum of £71.70 per week, which means that someone on a salary of £30,000 could suffer from an 88% fall in weekly income.

The Question
If you lost your income how would you continue to meet your essential monthly outgoings if you didn’t have any Unemployment Insurance?

Do I get any support from my former employer?

If you were to be made redundant your employer is required to pay a statutory level of redundancy pay. This varies depending upon your age and years of service however the maximum benefit is based on a weekly gross income of £350 (2009/2010).

Essentially your employer is required to pay 1 week’s pay for every full year of employment, roughly depending on age.

For many of us this leaves a gaping hole and a vast shortfall in income. Redundancy Insurance is used to fill this gap to ensure your financial obligations are met so you can focus on finding employment.

 

Should I Get Redundancy Cover if I’m Self-Employed?

Rob Harvey, independent protection expert at drewberry, does not recommend unemployment insurance for the self-employed

We would not recommend Redundancy Insurance to self-employed professionals or company directors in most cases. This is because insurers see self-employed workers as technically employed by themselves, which means that they cannot claim for unemployment even if they were to lose a major contract.

The terms and conditions of some Redundancy Insurance policies can be ambiguous, so it is important that you read them carefully and consider asking a professional financial adviser to break them down for you if you’re not sure what they mean.

Rob Harvey
Independent Protection Expert at Drewberry

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The cost of your insurance depends on the options you choose and your personal circumstances.

What Factors Affect the Cost of Redundancy Insurance?

The cost of Redundancy Cover will not be the same for everyone because it is determined by your circumstances and the options you choose for your cover.

Length of Cover

Whether you are combining the Unemployment Insurance with accident and sickness or not the policy is designed to provide short term protection.

When buying your policy, you have the option to choose a benefit period of either 12 or 24 months. The longer the benefit period the higher your premiums.

The right options for Redundancy Cover will keep you protected without stripping your wallet.

Level of Cover

The amount you can insure will often depend on whether you are linking the protection to your mortgage. As a general rule you are able to insure the lesser of 65% of your pre-tax earnings or £2,500.

Unemployment Insurance is no exception to this rule, the greater the level of cover the higher your premiums, however, premiums are likely to be less than a full accident, sickness and unemployment policy as you have stripped out a proportion of the cover in just choosing unemployment.

Setting Your Deferred Period

Deferred Period is a period of time for which you agree to be unemployed until you are able to claim on your insurance policy. Your insurer will give you several options for your deferred period and the longer you set it, the cheaper your premiums are likely to be.

You should consider the likelihood of you not being able to find a job within any notice period you receive from your employer plus your deferred period. You won’t be able to claim until both those have lapsed, so while a longer deferred period could save you money it may make it harder to claim.

tomconnerportraitround

To ensure you are correctly protected it is best to speak to an adviser, particularly if you are self employed. Unemployment Insurance for the self-employed or for company directors is not something we recommend given the ambiguity when it comes to the terms and conditions. So please be careful and make sure you read the T&Cs.

Tom Conner
Director at Drewberry Insurance

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 Need help with Unemployment Insurance UK?

Need Unemployment Insurance Advice?

There are many different protection products available to protect your finances if you are out of work and a lot of options to choose to tailor your cover to your needs. That’s why, instead of tackling the job alone, we recommend speaking to one of our expert advisers.

As Drewberry is independent of any insurer we can arrange a suitable unemployment protection plan from any one of our large panel of insurers and can therefore provide truly impartial advice. We want to provide you with all the information you require in order to make the best decision on your protection needs.

Contact us today on 01273646484 or drop us an email at help@drewberry.co.uk.

 

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Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Income Required
per
month
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

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