Redundancy Protection Insurance, UK

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Guide To Redundancy Protection Insurance

By Eamonn Turley
Eamonn Turley Insurance Expert

Eamonn Turley has a wealth of experience within different insurance sectors. Through hard work and over time, he has gained expertise in digital marketing and user interface design. Elements that are crucial to any successful online business. The key aim is to develop websites that are intuitive, fast to load and provide insurance quotes tailored to your needs.

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July 2023

There’s nothing worse than losing a job. And there’s nothing worse than losing a job without any financial backup. During these difficult economic times, company redundancies are on the rise. More people are being let go because of the lack of work. But how do you protect yourself against possible job losses? Buying Redundancy Protection Insurance could be the solution and one of the wisest decisions in your life.

But what is Redundancy Protection Insurance? How does it work? What does it cover? Let’s take a look at everything related to redundancies and how you can protect yourself against any unforeseen job losses.

Redundancy Protection Insurance UK

What Are Job Redundancies?

Being made redundant from your job is different from being fired. Job redundancies occur mainly when a company doesn’t have enough work for you to continue your working relationship. A company cannot make you redundant and then hire someone else to do your job. It’s illegal. In effect, your job has become redundant, so you are now surplus to requirements. 

It’s not a nice thing to hear, especially if you have a family, a mortgage to pay, or any other financial commitments. You might have just purchased a car on finance and now have years of monthly payments to make without a steady income. It really can change the trajectory of your life. Most people don’t see the redundancy coming, which means you might be unprepared without any cash buffer or savings. But don’t fret, because there is a way to cover yourself against these possible eventualities. 

Why Choose Redundancy Protection Insurance?

It’s normal to seek out insurance coverage for all manner of things in life. House insurance, medical insurance, or even pet insurance are commonplace. We insure ourselves against a multitude of possible scenarios, so why don’t we insure ourselves against possible redundancies and job losses? The moment you book a holiday, the second thing you do is buy holiday insurance. Why don’t we buy redundancy insurance protection the moment we get a new job? Probably because we are not educated that way.

When you think about it, protecting yourself against losing a job should be one of the first things we do. If you lose your job without much prior notice, how can you continue to pay your bills? How do you support your family? And how do you ensure food is always on the table? That’s quite a lot of pressure if you don’t have any help, savings, or a backup plan.

If you live in the UK, for sure, you will be entitled to unemployment benefits. But how far does that meagre amount of cash spread? Not very far. Did you know that a solid redundancy insurance plan can replace your loss of income for up to 12 months? Keep reading to find out what kind of coverage you can obtain.

What Is Redundancy Protection Insurance?

As with any insurance plan, the first thing you need to do is make sure you’re eligible. If you get fired from a job due to your own incompetence, you are not covered. This type of insurance only covers you being made redundant from a job by your employers because of lack of work.

There is usually an initial exclusion period with redundancy protection plans. You will need to work through this period before you can even claim any redundancy protection. These exclusion periods are usually 60 days, 90 days, or 120 days. If you get laid off before that period expires, you won’t be covered, or due to any compensation, and the insurance plan will become invalid.

After the initial exclusion period has been completed, you will be covered against any unexpected redundancies. It’s important to remember that you won’t even be able to buy the insurance until the exclusion period is completed. But after that time, you can choose a plan that suits your own needs. 

What Does Redundancy Protection Insurance Cover?

Redundancy Protection Insurance covers you against involuntary unemployment and involuntary redundancy at the hands of your employer. Your coverage plan will list what you are and not covered against. Each plan is different, so make sure you read the small print. For example, if you wake up one day and decide to quit your job for no apparent reason, you won’t be covered. This is considered leaving of your own free will. 

If you are fired due to disciplinary issues or misconduct, this is not considered a redundancy. Alternatively, if you are offered a redundancy package by your employers that you take, you also won’t be covered by redundancy protection insurance. Again, this will be you leaving of your own free will.

So, What Are You Covered Against? 

If the company you work for goes bankrupt or goes into liquidation, you are covered. If your employers are restructuring the company that results in you losing your job, you are covered. You are also covered against a potential company merger that results in job losses. You are basically covered against unforeseen involuntary unemployment or redundancies that were decided by your employer even though you did nothing wrong.

Why Do You Need Redundancy Insurance Coverage?

Do you currently have a job? If so, do you have a mortgage with monthly payment instalments? How about monthly payments for car finance? Are you currently in the hole where your credit cards and credit limits are concerned? Are you the main provider for a family with kids? Could you survive and continue paying for all these things on less than £70 per week government unemployment benefits? We all know the answer to that question. 

If you have to pay for one or more of those things above, you seriously need redundancy protection insurance coverage or your life could be in ruins. 

In the past, support for mortgage interest (SMI) for homeowners was covered in some way by the UK unemployment benefit system. But nowadays, it’s treated as a loan as opposed to a benefit. The ‘loan’ is then secured against your property, which you’ll have to pay back with interest if you remortgage or sell your property. 

Am I Okay Using My Life Savings?

The harsh reality is your life savings will quickly shrink when you’re paying your monthly bills without any reliable income. Even if you have lots of cash saved, it’s alarming how quickly your resources will become depleted. How long can your savings last without a job? Two months, three months, a year? They will run out eventually, and possibly sooner than you think. 

Why take the chance? Purchasing reliable and solid redundancy protection insurance plans will give you a monthly income for a certain period. You might never have to use the insurance plan, hopefully. But do you want to take a chance by not having this type of coverage? Only you can answer that question.

What Types of Redundancy Insurance Are Available?

When you break it down, there are only two types of redundancy protection insurance available, so it’s not so complicated. There is a type that is directly linked to your salary and income. The second option is insurance that is directly linked to your financial commitments and your income. Let’s take a more in-depth look into these two policy types.

Insurance Policies Linked To Your Income

The most common policy is protection coverage that is directly linked to your monthly salary and income. It’s purely linked to your salary and nothing else. Many people choose this policy because it’s the most flexible and based on how much money you get paid every month. Even if you have mortgage payments and other monthly bills, it doesn’t matter. You will receive similar amounts of money that you already get paid every month so that you can continue paying your bills.

Insurance Policies Linked to Your Financial Commitments 

The second policy is directly linked to your ongoing financial commitments each month, and your income. For example, you can buy a policy that is directly linked to your monthly mortgage payments or directly linked to the exact monthly rental costs. You can buy policies that are directly linked to an exact bill you need to pay. These are the cheaper policies because they come at a reduced risk for you and the insurance provider. 

If your policy is directly linked to your monthly financial commitments, then it will only cover those costs and no more. These commitments are usually for council tax, utility bills, and insurance payments. If your policy is directly linked with your mortgage or loan payments, you will need to provide verified proof of the bills to make a claim. These policies tend to be quite restrictive, which is why so many people opt for Redundancy Protection Insurance to cover their income. 

Do I Qualify for Redundancy Insurance?

Checking if you are eligible for redundancy protection insurance is probably the first thing you should do. No point in going through all this rigmarole if you don’t qualify. The exact criteria you need to meet can differ depending on the individual policy you choose. But there are some standard criteria that you will need to meet to be eligible. Let’s take a look at these below:

  • You should be between the ages of 18 and 64 years old.
  • You need to be a permanent resident of the UK.
  • You need to be continuously employed for the past 6 months before you purchase.
  • You must be fully aware of any impending unemployment or possible redundancy issues at your company.
  • You must also know of any misconduct or disciplinary procedures from your employer.
  • If you are self-employed, you must be aware of any potential closure possibilities for your company.

The above criteria are something that every person needs to adhere to if they want to be eligible for redundancy protection. If you follow this list and pass these criteria, you can proceed to choose a plan that is individually suits to your needs, budget, and lifestyle. You really can tailor your policy to get the extra benefits you need.

How Do I Claim Redundancy Insurance?

The main reason you buy this type of insurance is that you are worried or concerned about something in your working life. You already know that something could pop up in the near future that could derail your whole life, at work and home. And when you want to claim the policy, you need to know the right time.

If you have been made redundant, you can make a claim. That’s standard. However, this must be an involuntary redundancy that was instigated by your employer. If you are made aware by your employer that redundancy could be imminent, you need to inform your insurance provider right away. It’s essential that you inform them immediately, or that could be in breach of your policy. Your insurance provider will make a note of your conversation and record the information. It’s quite normal for a company to inform their employees of impending redundancy weeks or even months in advance.

Always Be Honest With Your Insurance Provider

Do not wait until the last working day to inform your insurance provider of your redundancy. Be prepared, and ensure you have everything in place before the day arises. This way you can make your claim as quickly as possible. For example, it’s common for redundant workers to be paid in lieu of a notice period. By informing the insurance claims team, they can already start processing your claim, so that payment can be made on your finish date.

As soon as you find out about your redundancy, call your insurance claim team right away because a lot of back and forth conversations need to happen before you can make the full claim. Just be aware of your situation and make sure your insurance provider is also kept in the loop, and you will avoid any potential issues.

What Are Redundancy Protection Insurance Costs?

Now we understand more about redundancy insurance, the different types, what it covers, and why you need it, you need to think about the pricing. How much does redundancy protection cost? 

As with all insurance policies, it depends on the type of coverage you want. There are so many add-ons and possibilities to customize and personalize your policy to match your individual needs. But these individual things all cost money. We suggest that you follow a few simple rules when it comes to pricing an insurance policy.

How Old Are You?

Age is something we always have to take into consideration. Insurance policies always come at higher costs if you are older. That’s just the way it is right across the insurance industry, unfortunately.

Considering Exclusion Periods

The policy price will always be higher if you have a shorter initial exclusion period. If you buy a policy with a 60-day exclusion period, it will be more expensive than a policy with a 120-day exclusion period. And so on…

Excess Period Policies

Another factor you need to consider is a policy with an excess period. If you want to be paid quickly, you can pay for a policy with an excess period, but it will be more expensive than a standard one.

Fixing Benefit Amounts

You can buy a policy with fixed benefit amounts, which is basically the amount of money you will receive every month if you’re made redundant. The higher the benefit amount limit you choose, the higher the policy price will be. Most policies let you claim up to 65% of your gross annual income with a price up to £2,500.

Can I Compare Redundancy Insurance Quotes?

A good way to find a viable and competitive redundancy protection policy would be to compare quotes. But how do you compare policies? And what things do I need to consider before buying a redundancy insurance plan?

Comparing Your Details

When sourcing redundancy insurance, always compare the initial exclusion period options. There are a few different period options, so you need to decide which one suits your requirements, or even your budget. Comparing excess periods is also highly recommended because you don’t want to wait forever to get paid.

Comparing Exclusions and Benefits

Always, without fail, compare the terms and conditions of competing insurance policies. Do you get any additional benefits or features? Some policies might waive the premiums for the first month or offer additional legal protection. Some policies give you more for your money than others.

You should always consider everything before you buy any insurance plan. Always compare the benefits, details, and add-ons of each individual policy to get the best deal possible.

Compare Redundancy Protection Now!

Now we are armed to the teeth with information, it just goes to show how important redundancy protection insurance really is. It’s just as important as having a house, life, and holiday insurance policy. Protecting your job and income is essential if you have a family or if you have a mortgage or other monthly payments. You don’t want to lose everything because your employer is restructuring the company or reducing staff. 

Just remember that you can’t just quit your job and be eligible to get an insurance payout. You need to follow the rules, follow the correct procedures, and make the right choices. Don’t be left out in the cold without a coat. Buy redundancy protection insurance now and sleep peacefully at night. 

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