Redundancy protection is clearly a very sensible purchase in these days of rapidly rising unemployment, when very few jobs can be considered safe and secure. Like any payment protection insurance, however, it is important to know what it is that you are buying and that it is purchased at a competitive market rate.

The problem with the way this type of insurance has been widely sold in the past, however, is that it has invariably been packaged together with accident and sickness insurance. In itself, that would have been no bad thing, but for the fact that customers were frequently given inadequate information about the product and, when buying it from lenders who had also arranged a loan or other credit, found themselves paying considerably over the market price for the cover obtained. As a result of such mis-selling thousands of customers have been sold inappropriate insurance, insurance for which they are ineligible and insurance which they could have bought far from cheaply from an independent insurance provider.

One of the best known of the independent providers is British Insurance, whose managing director, Simon Burgess, says: “At last, the regulators appear to be tackling the past problems of mis-selling and are on the verge of forcing all providers of insurance payment protection insurance to ensure that their customers know just what they are buying and at what price.

What Simon is referring to is a set of rules recently proposed by the Competition Commission to ensure fair trading in what is an inherently very useful and potentially indispensable insurance product. The proposals are currently in a consultation phase, but the Commission hopes that they will implemented during the course of 2009.

When adopted, the new rules will require all providers of reduction protection – and, indeed, any form of payment protection insurance – to provide the customer with a detailed, personal quote that explains just what is covered and at what price in terms of the premiums payable. It will no longer be permissible, for example, to sell “single premium” insurance – where the premium in the past has often been added by the lender onto the total price of the loan, thus not only obscuring its true price but also resulting on interest being added to the premium cost as well as the cost of the loan.

In future, those finance companies involved in arranging loans or credit will be disbarred from selling any related insurance protection within 14 days of arranging the loan. This will give customers an opportunity to shop around for more appropriate and more competitively-priced products and, so, stimulate further competition in the market. Additional rules are also designed to ensure a far greater transparency and the provision of better information about the product to consumers.

The new code proposed by the Competition Commission is designed to bring the whole of the industry into line with the practices already operated by the independent providers and should ensure that customers are given a far clearer picture of just what they are buying and at what cost. Given the upsurge in interest in redundancy protection brought about by the soaring unemployment figures, such transparency is certain to be welcomed by the insurance-buying public.

Government statistics suggest that the number of unemployment benefit claimants will rise by more than half a million over the next two years, taking the total of such claimants to more than 1.5 million. When added to approximately the same number of unemployed who do not claim benefits, this brings the estimated total number of jobless in this country to over three million. With unemployment at these rates, it is hardly surprising that many people are asking how they can cover redundancy.

In fact redundancy can be covered remarkably easily and cheaply, so that unemployment doe not inevitably lead to mortgage payment arrears and the risk of repossession or that missed loan repayments do not inevitably lead to adverse credit reporting or county court judgments. In order to avoid such outcomes, it is simply necessary to cover redundancy with a suitable redundancy protection insurance that pays out a regular monthly benefit in the event of the policy holder losing his or her job.

If redundancy insurance is used to protect mortgage repayments, then most policies will allow cover up to 75% of the policy holder’s income whilst in work, or £3,000 a month, whichever is less; if the cover is for other borrowing of loans or credit, the typical limit is 50% of the income when in work or £1,000 a month.

Apart from the comfort of knowing that redundancy protection is safely in place, there are two additional reasons for not delaying the purchase of such insurance. The first relates to the availability of such cover. As the risk of redundancy daily grows ever more likely for hundreds of thousands of individuals, so many insurers have become reluctant to offer the cover. A report in the daily Telegraph newspaper on the 17th of November 2008, for example, revealed that many insurers have withdrawn their standalone, redundancy only insurance plans and are selling only the complete package of accident, sickness and unemployment insurance. As the risk of unemployment continues to grow, therefore, fewer insurers will be offering standalone redundancy cover, whilst those that do so will inevitably need to start charging higher premiums.

A second reason for acting quickly is related to the way in which redundancy cover works. In order to prevent unfair claims under such insurance from individuals who already know they are about to be made redundant, all policies carry an initial exclusion period (typically the first 120 days) during which time no claims can be made. In order to cover redundancy safely and securely, therefore, it could prove important to have beaten this exclusion period by having the cover in place well before a redundancy is announced.

One of the leading providers of redundancy insurance – and one of the notable exceptions specifically cited in the Telegraph report of the 17th November as continuing to market standalone unemployment insurance – is British Insurance. The Company’s managing director, Simon Burgess, says: “with unemployment rising at its present rate and with further job losses forecast for some time to come, of course it’s important to cover redundancy – and the sooner the better”.

Mortgage payment protection insurance could help to stop you from losing the roof over your head if you should lose your income. While it might be hard to even consider the fact that you could lose your income it can and does happen. Accident and illness could happen at anytime while repaying your mortgage and if they do they can leave you incapacitated for several months. As no one can say their job is safe redundancy can also happen and often with very little warning. When you take these factors into account having nothing to fall back onto as a safety net can be a huge risk.

You can take out mortgage payment protection insurance by deciding on the amount of your mortgage repayment you want to protect. This amount will be pre-agreed by the provider you choose to take it out with, if you go with a standalone provider. The amount chosen to protect is the money the policy would pay back each month, for the term, if you needed to claim on the insurance. The income would be tax free and would go a long way towards you being able to maintain the mortgage repayments. When you would be eligible to put in a claim can differ between providers so it would be essential to check out the terms offered by the provider. Some providers will begin to pay your income once the 30th day has been reached while with others it can be as long as 90 days before you are able to claim. The same goes as to how long the protection would payout. Some could offer protection that continues providing your income for 24 months while with others it could be a 12 month policy.

Usually when taking on the mortgage you will be offered a policy by the lender. While this could seem to be the easiest way to take out the protection, it is usually the dearest option. In the majority of cases the high street lender will work out the full cost of mortgage payment protection insurance and then add it in with the money you are borrowing. This means that you will be paying interest on not only the mortgage money but also the payment protection. Along with this if you took out your mortgage for say 25 years this is the length of time the lender will have calculated the protection. Should you be lucky enough to be able to pay off the mortgage after 20 years you will not need mortgage cover for 25 and would have to go through the process of having to claim it back. Another downside to taking a policy in with the mortgage is that often the high street lender gives very little information about the cover you are buying. In the past this has meant that cover has been taken by those who could not claim against it such as those of retirement age or who were only working in a part time position.

High street lenders usually do not tell the consumer that they can shop around for a policy themselves and in some cases the lender includes the protection without you knowing. However this could all change soon when new rulings come into play which means that lenders would not be able to sell protection alongside their mortgage. They would have to wait for a period of 14 days before then contacting the consumer and asking if they want to take out a policy. At the time of selling the lender would also have to tell the consumer of their option of being able to take a policy independently.

All providers add in some exclusions and some can add in more than others. These would have to be checked against your circumstances to ensure suitability before you take on the policy. An ethical provider will give you all the information needed to check on their website.

If you choose an independent provider to take out your mortgage payment protection insurance with then you would be in total control of your payment protection plan. The amount you choose to protect, your age and the level of insurance taken would all go towards determining how much you pay in premiums. You could choose to take out a policy against the possibility of you losing your income to accident sickness and unemployment. You could also choose to take it just against unemployment or just for incapacity alone depending on your needs. As long as you pay the premiums for the protection you would be covered and could put in a claim on the insurance at anytime in the future after waiting for the deferment period.

If you were to become a victim to one of the events insured against you would have time to search around and find work or the protection would allow you the time needed to search for another job. As both of these events could take some considerable time you would be glad of the protection to fall back onto. Without a back up plan behind your life during this time could be a great deal harder than it need be. You could have to make a great many changes to your lifestyle during this time which could leave the whole family stressed to breaking point. Even by making the biggest cutbacks you could still find yourself falling short of the mortgage money.

If you should fall into mortgage arrears of just one month the lender will send out a letter reminding you of the missed repayment. Should you be unable to catch up and continue to miss more repayments your lender will expect you to make an appointment to see them and want you to make an agreement to repay what you owe? As you have not got a regular income coming into the home an agreement could be impossible to make. If this is the case the lender would have no other alternative but to take you to court to seek repossession of your home. If this happens then you are at serious risk of losing your home and everything built up in it. Mortgage payment protection insurance would go a long way towards ensuring you would have the money needed to keep up with the repayments and do away with this worry.

A quarter of all employees believe themselves to be worse off now than they were this time just 13 weeks ago, while a third are gravely concerned about maintaining mortgage and other loan repayments if they were to lose their job. It is not difficult to see, therefore, why adequate redundancy insurance is uppermost in so many people’s minds.

The widespread fear of coping not just with unemployment, but the concomitant difficulties of staying on top of existing financial commitments, was thrown into stark relief by the results of a survey published in The Independent newspaper on the 7th of December 2008. Already struggling to repay their debts, one in three people are shown to be “concerned” or “very concerned” about how they would cope in the event of redundancy.

Commenting on the survey results, Simon Burgess of British Insurance, one of the leading independent providers of redundancy insurance, comments: “it is hardly surprising that so many people are concerned about their debts and how they could possibly be repaid if they were to become unemployed. If only they knew how effectively redundancy insurance could smooth the difficult transition between losing one job and finding another, they could be relieved of a considerable burden of worry”.

Redundancy insurance works on a very simple and straight forward principle. The policy holder pays a modest premium to insure against the risk of becoming unemployed. If that should happen, the policy pays out at regular monthly intervals a predetermined benefit that can be used to cover existing debts such as a mortgage or other loan, or even provide an alternative, replacement income until a new job is found or, typically, for up to a maximum of 12 months. Although some policies offer the option of extending this maximum period to up to 24 months, previous research has shown that the average time taken between being made redundant and finding a new job is four months.

Redundancy insurance is also very flexible in the way it provides protection for existing financial commitments. At the start of the cover, the prospective policy holder will need to decide whether the insurance will be designed to cover specific obligations, such as a mortgage or other loan and credit repayments, or whether it will be intended to provide a regular monthly income.

In the case of mortgage or loan repayments, the value of these will clearly determine the level of insurance that needs to be arranged. In the case of income replacement, then the prospective policy holder will need to estimate the amount of income likely to be needed to tide him or her over until re-employment. With most policies, redundancy insurance can be used to cover up to a maximum of 75% of a policy holder’s normally earned income, or £3,000 a month, whichever is less, if the cover is to protect mortgage repayments; and up to 50% of the normally earned income, or £1,000 each month, whichever is less, if the policy is designed to provide cover for a personal loan or other credit or to provide a regular replacement income which can be spent entirely at the policy holder’s discretion.

The Confederation of British Industry (CBI) expressed a grim outlook for the next few years when a spokesman said: “What is clear is that the short and shallow recession we had hoped for a matter of months ago is now likely to be deeper and longer lasting”. Reported in The Independent newspaper on the 17th of November 2008, the forecaster added: “An unwelcome consequence of the downturn will be a significant loss of jobs, many of them in sectors that have been relatively insulated until now”. That significant loss of jobs will leave millions of people in severe financial difficulties and make unemployment income protection insurance a lifeline needed by almost everyone.

Unemployment, of course, is not just about a traumatic change in the routine of normal life, it is about the loss of an income until alternative work can be found. This is where income protection insurance comes into its own. With an adequate level of insurance, the policy holder facing redundancy will have the considerable comfort of knowing that when the normally earned income stops, an insurance payout takes over and delivers a regular, monthly replacement income for as long as it takes to find another job.

The amount of replacement income depends, of course, on the level of cover decided by the policy holder from the outset and can typically be as much as 50% of his or her normally earned income, or £1,000 a month, whichever is the lower figure (remembering that policies will vary from insurer to insurer, so that these limits might also be different). In any event, however, unemployment income protection insurance will help to ensure that critical household bills and expenses will continue to be paid whilst searching for another job and that re-employment will not have to be started with a mountain of unpaid debts to clear.

Although unemployment insurance is available to anyone of working age, who is currently in regular employment and has been so for at least the previous six months, it is nevertheless important to move relatively quickly to ensure that cover is in place before the signs of impending redundancies start to appear at your particular place of work. All policies will have an initial “exclusion period”, during which time it will not be possible to make a claim. This is to ensure that the insurance is not unfairly taken up by those who have already received, or have a reasonable expectation of receiving, a redundancy notice in the first month or so of starting the cover.

In the event of a valid claim, however, unemployment insurance will continue to pay out the insured benefits every month until alternative work is found or for up to a maximum period of time that is typically 12 months (though some policies will offer an optional extension of a further 12 months on payment of an additional premium.)

As Simon Burgess, of market leaders if the provision of unemployment income protection insurance, British Insurance, says: “The CBI is well-placed to comment on the long road ahead before its members can look forward to any economic upturn. In the meantime, however, unemployment will continue to rise and, with it, the need for individual employees to ensure that they have adequate unemployment insurance”.

Unemployment protection will be separately needed over the coming years. According to a report in the Guardian newspaper on the 2nd of December 2008, the number of companies facing bankruptcy in 2009 is predicted to rise by 50%. This would take the 2008 figure of 21,900 up to 32,300 businesses collapses in the course of a single year. This is not the end of the dire news, however, since the number of such failures is forecast to hit 32,400 in 2010.

Every business closure, of course, takes with it many, sometimes thousands, of jobs. That is one of the reasons behind a total jobless figure that is topped by almost ever commentator to pass 3 million before 2010 is out. Unemployment on this scale is grim news for the economy as a whole, but it also brings in its wake countless individual stories of financial misery.

Fortunately, however, there are still ways in which the individual can protect him or herself against the worst impacts of unemployment. The most effective and dependable unemployment protection takes the form of an insurance policy which pays out in the event of the policy holder being made compulsorily redundant and thus provides a short-term replacement monthly income until alternative employment can be found.

More than that, this type of unemployment insurance is extremely flexible in the way that it works. It can be used to provide a general all-purpose substitute income, but it can also be used to provide protection for specific financial commitments, such as the repayment of loans and other credit or a mortgage. The purpose of the unemployment protection cover is decided by the policy holder at the outset, when the amount of protection is also determined.

For example, if the policy holder wants a general income protection policy or one that will cover repayments on a personal loan or credit, he or she will typically be able to cover up to 50% of his or her normally earned income, or £1,000 a month, whichever is less. On the other hand, if the insurance is intended to cover the specific commitment of a mortgage, then up to 75% of the normally earned income, or £3,000 a month (whichever is less) will generally be able to be covered. These actual limits, of course, are likely to vary from one insurer to another.

Once the purpose of the unemployment protection has been decided and the amount of cover determined, premiums are quoted in terms of a price for each £100 of cover provided. In the even of the policy holder then becoming involuntarily unemployed, the insurance will pay out every month until new work is found or usually for up to a maximum of 12 months (although some policies offer the option of extending this to 24 months, on payment of an additional premium).

Simon Burgess of market leaders in the provision of unemployment protection, British Insurance, says “recession, the failure of business after business and the gloomy prospects for any early recovery all mean that unemployment protection should be given a high priority by anyone who currently has a job. The protection this kind of insurance provides will take some of the financial pain out of the difficult transition from one job to the next”.

“Unemployment will get much worse” – so ran the headlines in the daily Telegraph newspaper on the 12th of November 2008. Reports since that date have confirmed the trend and widely predict that the total number of jobless will rise above 3 million within the next two years. Although redundancy inflicts a serious blow, there are nevertheless measures the individual can take by seeking adequate unemployment cover.

One of the worst aspects of major economic trends and crises is the apparent helplessness of the individual who gets caught up in them. For example, one of the biggest fears of the homeowner is that redundancy will almost inevitably lead to the loss of their home. With no income with which to meet the mortgage repayments, many will fear that the home is bound to be repossessed by their mortgage lender.

Unemployment cover can put such fears to rest. The majority of mortgages can in fact be adequately covered by an unemployment insurance which pays up to 75% of the policy holder’s normally earned income, or £3,000 each month, whichever is less, in the event of their being made compulsorily redundant. Although this ceiling on the maximum amount of cover available will vary from insurer to insurer it will generally prove more than adequate to protect most mortgages and so avert the threat of repossession. Indeed, with most policies, if a claim is made under this type of cover, the benefits can be paid directly to the mortgage lender.

But it is not necessary to be a homeowner or to have a mortgage in order to enjoy the protection of unemployment cover. Instead of the insured benefits being used to cover mortgage repayments, the policy can be written to provide a general, replacement income from which the rent and many other household bills and expenses can be paid in the event of redundancy. In this instance, the maximum amount of cover available will typically be equal to 50% of the policy holder’s normally earned income, or £1,000 a month, whichever is the lower figure.

Similar limits are likely to apply if the claimed benefits will be used to ensure the monthly repayments on any personal loans or other credit.

Unemployment cover arranged under these types of insurance is intended to provide short- to medium-term relief from the financial losses incurred by redundancy and the payouts continue, therefore, until the policy holder has found alternative employment or for up to a maximum period which is typically 12 months (although some policies offer the optional extension of a further 12 months, on payment of an increased premium).

One of the leading specialist providers of such unemployment cover is a company called British Insurance, whose managing director, Simon Burgess, comments: “it is only natural that people feel a certain powerlessness when faced with the looming prospect of redundancy. Many feel that the loss of an income with which to pay the mortgage, the rent or countless other household bills will inevitable lead to crippling financial difficulties. Appropriate unemployment cover can banish those fears and restore the power of decision-making and financial well-being to those people”.

The recession deepens and unemployment soars. The individual’s risk of redundancy appears to have reached such proportions that many insurers are reluctant to offer insurance against the possibility. Whilst others have already deserted the market for much-needed protection, however, one provider stands out by continuing to offer unemployment insurance on a standalone basis. With a contracting selection of products on offer and inevitably higher premiums on their way, however, consumers would be well advised to buy now, whilst policies are still available.

The company continuing to buck the trend is independent payment protection insurance specialist, British Insurance, which was specifically singled out in a report by the daily Telegraph newspaper on the 17th of November 2008, because it continues to offer policies designed to cover the risk of unemployment alone. The report makes the point, however, that such providers appear to a dwindling breed as the risk of redundancy escalates amongst the work force.

Says managing director of British Insurance, Simon Burgess: “other insurers appear to have got cold feet over unemployment insurance and have simply abandoned the market. We would be most reluctant to abandon customers in this way by depriving them of access to an excellent safeguard against the financial losses of redundancy just when people need it most”.

What makes unemployment insurance such a compelling choice is the simplicity of the principle – the customer pays a premium against the risk of becoming compulsorily redundant, so that if that event happens, the insurance pays out a regular monthly benefit to compensate him or her for that financial loss.

Adopting this common principle, unemployment insurance is commonly sold packaged together with accident and sickness insurance (indemnifying the policy holder against financial losses resulting from an incapacity to work) and this packaged trio of insurances continues to be offered by most insurers. However, for those employees who enjoy the protection of their employer’s in-house accident and sickness pay scheme, separate, individual insurance against these particular risks is probably a superfluous and unnecessary expense. For such people, standalone unemployment insurance would represent sufficient cover.

Although it covers a single risk, unemployment insurance is nevertheless extremely flexible in the level of income that can be covered and the use to which the claimed benefits can be put. The amount of cover is chosen by the policy holder at the outset when the cost of policy premiums is generally expressed in terms of the price per £100 covered. The maximum amount of cover available is generally related to the purpose for which the benefits are intended. Thus, if the cover is intended to cover the policy holder’s mortgage repayments, the maximum level of cover is typically fixed at 75% of his or her normally earned income or £3,000 a month, whichever is the lower figure. If, on the other hand, the unemployment insurance is designed to provide an alternative, replacement income during a period of unemployment or if it is intended to be used to maintain repayments on a loan or other credit, the maximum cover available is more likely to be 50% of his or her normally earned income or £1,000 a month, whichever is the lower figure.

Accident sickness unemployment insurance – just as often known by its simple acronym of ASU insurance – is a popular and increasingly indispensable means of safeguarding personal finances. It is a simple, straight forward, flexible and remarkably inexpensive way of ensuring that important bills and expenses continue to be paid even when the policy holder is incapacitated from work because of an accident or sickness or finds him or herself involuntarily unemployed.

With nationwide unemployment now tipped by practically every commentator to break through the figure of 3 million within the next two years, this element of the package alone is enough to make ASU insurance an extremely wise buy. Redundancies are being declared in practically every economic sector and it seems that every week brings news of yet another closure of a once safe and secure high-street name. Yet all those employees who become suddenly unemployed also have mortgages, or rents, bills and countless other household expenses to continue to pay. Without some form of insurance, their personal finances could be facing ruin.

Of course the spectre of unemployment steals the headlines, but it is not the only cause of financial catastrophe. Whether the economy is riding high or plunged deep into recession as at the moment, other misfortunes continue to afflict a large number of the employed – including those who manage to keep their jobs. Accidents, by their very definition, happen suddenly and unexpectedly. The injuries sustained can frequently lead to several months of convalescence, when it is impossible to get into work. Similarly, ill-health can strike at any time and if it is a persistent or lingering sickness, the time taken off work can once again run into months rather than weeks.

Whether through accident, sickness or unemployment, those months out of work can result in a crippling loss of income. The payment of bills may have to be delayed and the failure to keep up with the mortgage repayments or rent can lead to the loss of somewhere to live. There is not only the short-term devastation this brings, but the long-term consequences of acquiring a poor credit rating for the delayed or non-payment of bills that fall due. This, in turn, will make it far harder to gain credit in future and will certainly make any such borrowing more expensive.

A company well-experienced in the provision of accident sickness unemployment insurance is British Insurance. The managing director of this leading independent provider, Simon Burgess, says: “there is not only the sudden up-turn in the risks of unemployment to contend with, but the on-going and ever-present danger of losing several months income through accidents and illnesses. Accident, sickness and unemployment insurance will pay out on a regular monthly basis in order to combat such losses and help to ensure that the policy holder’s finances remain in a healthy state of affairs during such crises”.

The consensus amongst most commentators is that unemployment in the UK will pass 3 million before the end of 2010. In the ensuing two years, therefore, many more jobs will be at risk as the current recession continues to deepen. Since those lucky enough to hold onto their jobs will also continue to run the normal risks of time off work through accident or illness, there is as great a need as ever for accident sickness redundancy insurance.

Government resignation to the soaring unemployment figures has been illustrated by the announcement – reported by the daily Telegraph newspaper on the 25th of November 2008 – of the need for the appointment of an additional 6,000 Job Centre staff in response to the rising tide of jobless. In November’s pre-Budget reports, government Ministers conceded that the numbers claiming unemployment benefits would rise by at least a further half a million by the end of 2010. Adding this number to the existing total and allowing for the fact that only about half the number of unemployed actually claim benefits, confirmation seems to have been given by the government itself that unemployment will indeed rise to 3 million.

Indeed, the upward trend in unemployment, which clearly increases the risk of any individual job ending in redundancy, has been enough to force many insurers to withdraw unemployment insurance products from the market – according to a Telegraph article dated the 17th of November 2008. Those that have done so have nevertheless retained the more common and more popular combined policies which cover all three risks of accident, sickness and unemployment.

One of the reasons for the continued popularity of accident sickness redundancy insurance is not only the continued – and increasing – need for it, but also its flexibility in being suited to a number of different personal circumstances. The level of cover, for example, is chosen by the policy holder from the outset and benefits in the event of any claim can be used to guarantee various financial commitments. The insurance can be used to ensure that mortgage repayments continue to be made, for example, and in such a case the maximum amount of cover generally allowed by most policies is 75% of the policy holder’s normally earned income, or £3,000, whichever is the lower figure. If used to cover repayments on a personal loan or other credit, or to provide a general income, the limit is typically 50% of the policy holder’s earned income or £1,000 a month.

“Accident sickness redundancy insurance provides a very effective and modestly-priced safeguard against the three most common risks to the financial welfare of the normal working man or woman” says Simon Burgess of leading independent insurance providers, British Insurance, “given the fairly grim economic prospects over at least the next couple of years, the continuing need for this type of insurance is pretty clear”.