Redundancy cover is an innovative product that will pay you a tax free income for 12 -24 months if you are made involuntarily redundant. This means that you will be able to still continue to meet some of your monthly financial commitments without financial worry.
There are three main types of redundancy cover – mortgage payment protection insurance; loan payment protection insurance; and, income payment protection insurance. The first two are aimed at specifically helping you maintain any loan commitments should you be made unemployed. The benefits received from the policy would help towards the monthly loan repayments you will need to make and often, associated costs. The latter provides a general income which you can use for whatever purpose you wish and is sometimes confused with income protection, largely because of synonymous names and terminology. Income protection, however, is more long-term in nature, sometimes offering coverage to retirement age but for incapacity only. It does not cover redundancy or any form of unemployment.
To get the redundancy insurance, all a policyholder need do is pay a monthly premium to the insurance provider. When a successful claim is made, the insurer will pay a tax-free lump sum each month for a set period to aid the policyholder in their quest to ensure debts do not go unpaid while they seek a new job.
Benefits kick in 30 to 90 days following the first day of unemployment, subject to an individual provider’s terms and conditions. Some providers, such as standalone protection specialist British Insurance, will back date your claim to the very first day you become unemployed, so you do not lose out.
On top of protecting against the financial distress caused by involuntary redundancy, another event, incapacity (or illness and accident) can also be covered, at an extra cost. Customers have the choice of buying protection against one or all three occurrences.
Brits need to protect themselves from the devastating impact of not having protection against short-term job loss. State benefits are often not enough to cover all your bills. Very few people are eligible for this short-term government assistance, and even those that are do not receive it for several months after the loss of employment.
It would not be controversial to say that us Brits have been left in charge of taking care of themselves if involuntary redundancy occurs. Families that rely on consistent monthly income often cannot sustain themselves very long when job loss occurs. There is no reason given the expansion of broker services, the low premiums on the open market, and the service-oriented nature of brokers that more Brits are not protected with redundancy cover.
For many years I have been a staunch campaigner against the major names in finance who, I believe, rip-off their customers by selling over priced, often unsuitable payment protection insurance (PPI) cover.