Last month saw the release of the government’s Sending Review and the outcome of vast cuts to public sector spending came as no great shock given the tough rhetoric used by David Cameron since his election as Prime Minister.
It is fair to argue that the cuts to public expenditure are vast, deep and due to set-in very quickly. In this light it makes sense for public sector workers to review their current protection needs, especially as the government’s own figures show public sector job losses totalling 500,000 over the next four years.
Cover still available
Despite the Spending Review and the resulting public sector job losses many insurers are still offering cover to both national and local government workers.
Although not all insurers are offering cover some of the largest and most reputable mortgage insurers are still offering protection provided that all the usual eligibility questions are met (discussed below).
Mortgage unemployment insurance can be taken out to lower the risk of mortgage default as a result of redundancy. This plan can payout up to 125 per cent of your monthly mortgage repayment should you suffer forced redundancy.
Meeting eligibility requirements
Whether a public sector worker or not, policy eligibility criteria must be met to take out any form of unemployment insurance. The usual requirement is that you do not have any knowledge of potential future redundancy.
Naturally, with such large government budget cuts there is an obvious risk of potential redundancy. However, many insurers have confirmed that as long as your specific employer (i.e. your government department or local council) have not announced plans to make redundancies the eligibility criteria can be marked as met. A redundancy announcement is classed as an announcement whether it is made formally or you have found out yourself prior to a formal announcement.
If your specific employer has made announcements of redundancies it may still be possible to get cover but only from a very small number of insurers. With these insurers is it still possible to take out a plan as long as you have not been told specifically that you are to be made redundant. If you have been specifically told of your potential redundancy then cover cannot be obtained.
Thus, to sum, if there have been no announcements of redundancies most insurers will still offer cover. If there have been announcements of redundancies but you have not been told specifically that you are to be made redundant then cover can be arranged but from a very small number of insurers.
Initial exclusion period
Before taking out a plan it is important to note that all payment protection policies come with an initial unemployment exclusion period, which usually ranges from 90 days to 120 days depending on the insurer.
With all insurers a valid claim cannot be made if an individual is made redundant or told specifically of their potential redundancy within the initial exclusion period (this includes being put on risk).
It is also important to note that some insurers may decline a claim if a general announcement of redundancies was made within the initial exclusion period but the policyholders formal redundancy occurred outside the exclusion period. With these specific insurers there are no thick and fast rules as all claims are treated on a case-by-case basis in these circumstances.