Unemployment protection works by providing a monthly benefit payment that serves to effectively replace a sizable portion of your lost monthly income. Is your family on a tight budget with mortgage payments, loan payments, and other bill payments to consider? Sadly, these financial responsibilities do not disappear just because your job does. You must be proactive and practical and buy cover before something unfortunate occurs. Unemployment insurance takes the form of one of three common types of payment protection insurance. (PPI) Mortgage payment cover, loan payment cover, and income payment cover are the products that make up the payment insurance portfolio.

Common terms and conditions to know when buying cover

Though much of the products are synonymous, there are a few key factors that can make one redundancy cover more valuable to you than another. First, consider the length of the plan. Some unemployment insurance plans run for 12 months, while others run for a period of 24 months. Knowing the length of a prospective plan is important because you need to know how long your benefits would last. Are you comfortable with the idea of quickly finding a new job? If so, 12 months may be long enough for you. If you are in an industry that is challenged with a job shortage, you might have to search for products that are 24 months.

You also need to strongly consider the point at which benefits payments begin following the filing of a claim. Once the insured event occurs, which is obviously not desired, you generally want your benefits to kick in as soon as possible. Some policies begin payment the monthly benefits payment 30 days after the covered event, while other plans have benefits that kick in at 60 days after the event, or 90 days after the event. Some policies offer backdated cover to the first day of claim. If you can afford to wait 60 or 90 days after losing your job to collect the first replacement cheque, you can be more flexible. However, if you do not have savings or other funding sources, you probably need a plan that begins paying benefits 30 days after the event. Otherwise, how do you fill the two to three month gap where you receive no monthly pay cheque?

How much cover?

The maximum allowable benefit offered by the typical unemployment insurance is £1500 or half the normal gross monthly income of the insured, whichever is lower. The benefits do not replace your entire income but do offer a considerable protection. Additionally, the benefits payments are non-taxed so your take home pay is much closer to your normal monthly take home pay, since those cheques have taxes taken out of them. You do not have to take the maximum cover. Although most people would want to, some people might try to save money on premiums by covering a lower amount of their income.

Eligibility requirements for unemployment protection

To be eligible to collect benefit payouts from a payment protection insurance policy, typically you must be a full time employee for six months. This means that people that are retired or are employed part time, are not eligible to collect benefits under the policy terms. Be aware of these eligibility requirements because even those that are not eligible have been targeted with policies by financial institutions trying to add the insurance onto a mortgage or loan product.

Levels of redundancy cover

Assuming you are eligible for protection, there are actually some options for you in getting the best insurance for your needs. Along with unemployment protection for involuntary redundancy, many payment cover providers offer protection against accidents and illnesses. A product that incorporates all three covered events is commonly referred to as ASU insurance, based on the three events that it insures (accidents, sickness, and unemployment). This is the broadest redundancy protection.

Why would you not want the maximum levels of insurance? The reality is many people should take on insurance for all these types of events. There are some people who receive strong cover against sickness and accidents from their employer. This means there is no reason for them to spend a lot of extra money to buy insurance for these events. There are others who may specifically need cover for accidents and illnesses, but do not want the unemployment cover. If you are confident that your education and skill set would make it easy for you to find another job, paying the premiums for unemployment may not be appealing. You cannot always control accidents and prolonged illnesses that come up.

Along with the ability to cover against accidents, sickness, and unemployment, many providers also offer an add-on benefit for carer cover. Do you have an aging parent? What if your wife, sibling, or child becomes seriously ill or injured? You may need to take on management of your loved one, which makes work very difficult. Carer cover pays you a monthly replacement benefit when you have to leave work to care for your sick or injured relative. This is a nice luxury to have when dealing with the stress of caring for someone in poor health. This added protection is nice to have and some policies throw in this benefit for free.

How to get the best deal for unemployment cover

Getting the best deal in unemployment protection begins with knowing the key terms and conditions already discussed. The next thing to become familiar with is the types of providers that offer these redundancy insurance products. Financial institutions who sell a broad portfolio of financial products, and insurance specialists are the two common sources for payment cover solutions.

Financial institutions typically have much more expensive premium costs for payment protection than do insurance specialists. They are also less knowledgeable, typically, about the products. Add to that a reputation that is less favorable with regard to service and support. Still, these large banks have long controlled the sector by aggressively selling the insurance products in combination with loan products, to unknowing consumers. The companies would often pressure new borrowers into thinking they needed to take on the lender’s insurance product as part of the package with the loan. Others simply added the protection to the repayment of the loan, effectively spreading the expensive premiums over time, reducing the appearance of the expense. The details of the insurance were tucked away in the fine print of loan disclosures.

This common process of packaging loans and insurance and pressuring consumers to buy was one of the issues highlighted by Citizen’s Advice, a leading consumer advocate group, in its 2005 super complaint to the Office of Fair Trading (OFT). The group also noted the routine mis-selling of the insurance to those consumers identified as ineligible to collect benefits from policies.

Following its own investigation, the Financial Services Authority (FSA) fined several leading high street companies it found guilty of mis-selling. This was an important step in changing the way of doing business in the PPI sector. The OFT ended its investigation by asking the Competition Commission to further research the sector. The Commission did just that and has since made several recommendations on how to create more fair selling standards for payment cover. First, the committee placed a 7 day waiting period that bans lenders from selling unemployment protection products to new borrowers for one week. This enables the customer to shop around for the best value on the open market. Several other recommendations were made that are to take effect soon.

Prices for policies are significantly lower through an insurance specialist. Loan payment cover is about 10 times less expensive when bought from a standalone seller. Mortgage payment protection is four times cheaper, and income payment protection is five times cheaper. Now that more consumers are familiar with the open market and payment cover products, they can take advantage of these great rates.

Key points to remember

Remember the following key factors when shopping around to find the best value for your family in unemployment protection:

• Unemployment cover is your best choice for involuntary redundancy protection as the State generally offers little support, even if you qualify
• There are some important elements of cover policies to watch for when shopping
• Independent insurers offer a much better value unemployment protection policy than financial institutions thanks to more expertise and better rates.

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What exactly does a policy do?
Unemployment cover will provide you with an income that is tax free, every month, if you are made involuntarily redundant. You then use it towards the repayments you chose to protect. For example, if you have taken out mortgage cover then your policy will provide an income that you could put towards you being able to maintain your mortgage repayments. The income supplied from your chosen policy will begin to pay out after you had been redundant for a period of time and it will continue for a set period of time before ceasing.

When does the benefit begin?
Your policy could begin paying out once you have been redundant or unable to work for a period of between 30 and 90 days. You might want to ensure that your policy will begin to provide you with an income sooner rather than later as 90 days can be a long time before seeing benefit from your policy. You could already have fallen behind on your mortgage, loan or essential repayments and this could cause you to struggle to catch up on them. Some providers could also date back your income to the first day of redundancy but you will need to check with the provider before you took out your unemployment cover policy.

How long will the policy continue to payout?
Your provider could continue for up to a maximum of 12 months if it was needed. Other providers might offer you a policy that will continue paying out for up to 24 months. If considering taking out cover that paid out over the longer period then of course you will need to pay more in premiums than if considering taking out a policy paying over 12 months.

You will also have to weigh up the fact that if you should have to claim on your unemployment cover for up to the term then it will cease upon reaching the term whatever your circumstances were at that time.

How much income could I expect?
The amount you get back is the sum of money that you decided to protect when you applied for your policy and which was pre-agreed. For instance the majority of providers will allow you to insure up to half of the gross monthly income that you bring home or up to £1,500 whichever amount was the least. You then get this back as tax free payments for up to the term.

Choose to take out incapacity protection too
While you can just take out unemployment cover you could also decide that you also want protection against incapacity in with your policy. If this is the case then you could add it in for a little more in monthly premiums. You then have security of being able to make a claim should you suffer from either event. Also check the terms of your policy to see if the provider has been generous enough to have included carer cover in with the policy. If they have you could claim on your policy if you needed to stop working so you could take care of a loved one.
The types of cover you could take

Income protection might be taken should you want to ensure that you will have money that you could use towards meeting your essential repayments. These could be your rent, your utility bills and even the grocery bill for the month. You could spread the income as you wanted and use it as you did your own income.
Mortgage cover could be put towards you being able to maintain your mortgage repayments. This policy could be enough to keep you out of mortgage arrears which could eventually lead to you losing your home if you should be unable to catch up on them.

Loan cover supplies an income that you could use towards keeping your loan repayments up to date. You will be able to maintain secured or unsecured loan repayments which could stop you losing your home or having bailiffs come into the home.

Shopping for the best deal on a policy
Shopping around and comparing for the best deal with your unemployment cover is one of the best ways that you can make savings on your cover. Standalone providers will generally save you a great deal on the cost of your policy in comparison to taking your policy with one of the lenders on the high street. You will also be able to check the wording of the policy to ensure that you will be eligible to make a claim on the insurance which is essential before you take it out.

Why you might want to consider a policy
You could consider a policy as opposed to relying on savings or the State as a means of maintaining your repayments or outgoings. Your savings could run out before you had found work or you had recovered and if claiming an income from the State you will have to be eligible to claim. Even if you are then you will only get help with the interest part of your repayment and up to so much of it. You will not see any money until you had been redundant or unable to work for a period of 13 weeks which means you could be in arrears or debts by this time.

Summary of the main benefits
With unemployment cover to fall back onto you will not have to make the lifestyle changes that you might have to make if you do not have a policy to fall back onto. The income supplied from your cover will give peace of mind which will leave you free to worry about finding work or recovering and getting back to work again. You will know how much income you had to rely on, when a claim could be made and for how long you will continue receiving your tax free income.

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The benefits of this are obvious as falling behind with certain debts or being unable to meet basic costs cannot only be financially damaging but can also be stressful and may affect somebody’s concentration when it comes to getting back into work. Failure to keep up with certain commitments can also hit someone’s credit rating, possibly affecting their ability to get a form of credit in future.

What can help after being let go is a redundancy package, although depending on how long somebody has been with a company, this may be hardly generous or effective. The welfare state system can involve payments which are barely enough for somebody to even feed themselves, let alone keep up with something like rent, council tax, utility bills, phone bills, and then basic household costs like food.

In exchange for the premium, unemployment cover Leeds will guarantee to give somebody a tax-free amount of cash straight to their account each month after they have been made involuntarily redundant. It keeps on arriving while somebody goes out looking for a job, giving them a kind of financial cushion which can help them to keep up with commitments in the meantime. Payouts continue on a monthly basis, either until the person has found a new occupation and started to receive an income again, or until the maximum payout period is met.

This kind of insurance is a short-term product but most basic deals will pay out for a maximum of 12 months or until the person is working again. Longer payout periods may be available depending on the level of cover and the insurance company. Firms also apply strict limits as to how much they would give somebody per month.

When you apply for a policy you will perhaps be asked to name how much you would expect per month after a successful claim, and it can be useful to add together some of your most important costs to get an idea of how much you might need. However, it is worth noting that insurance companies may not protect any more than £1,500 per month, or perhaps 50 per cent of your income, whichever amount is least, as an example.

After you have claimed one of the most significant things about unemployment cover is that you can often use the money how you wish, spreading it around all kinds of costs and the insurance company will not normally put any kind of strict stipulation on how you spend the money.

This is a bit different to some other variations of this kind of insurance, including mortgage cover, which can guard specifically against someone falling behind with their home loan in the event of involuntary redundancy, accident, or sickness. The payments on this kind of protection are designed to help only with the home loan.

Mortgage protection can often include payouts if somebody loses their income due to the diagnosis of a long-term illness which lays them up out of action, or if somebody is incapacitated and loses their income due to an injury. Unemployment cover Leeds can often be upgraded to include these eventualities too, providing a general income protection policy which guards against most of the common threats to someone’s income.

Unemployment cover in Leeds is not as much of a niche product as some people might think as it is sold by many of the high street insurance companies. However these types of company have been known to charge very high prices compared to some other firms. For example, independent specialist providers who only deal in this kind of cover can often offer cheaper deals which are also just as effective, if not more so, than the insurance offered by high street brands.

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Although each product pays benefits through monthly replacement income cheques, their intents are a bit different. Loan cover is designed to help you maintain your credit by managing monthly debt obligations like loans and credit card balances. Mortgage payment insurance allows you to make your monthly mortgage repayments when job income is lost. Income payment protection is used to manage ongoing financial needs that don’t go away because your job does.

Focusing on loan cover terms and conditions

Be aware of the key terms and conditions that make loan cover and the other payment covers what they are. Length of benefits payouts, starting point of the first benefit, and the maximum benefit allowed are among the important features that you should consider when selecting a policy.

Of course you do need to make sure that you are able to collect benefits before buying a policy. Not everyone is. To be eligible, you have to be employed full time for a period of at least six months. People employed part time or retired people are not eligible to collect benefits. Neither are those with pre-existing medical conditions.

If you are eligible, let’s start with a look at the typical benefits payout period. Some policies pay you benefits over the course of 12 months, while others payout for a 24 month period of time. Obviously, you should know how long your benefits would last.

You should also know when your first benefit payment would arrive. How long can you wait between your last job pay cheque and the first benefits payment? If you are like most on a tight monthly budget, you might have to consider only those products with a starting point of 30 days after the insured event. With more flexibility from savings, policies that start benefits after 60 days or 90 days might be okay.

The highest levels of benefits you can get do vary depending on where you buy your cover but are typically around 1500 Pounds or half your normal gross monthly income, whichever is lower, every month. Benefits are tax free, which helps you get more out of them. You could take on a lesser amount but this is not advisable unless you are comfortable with your ability to make it through a prolonged period without your normal work income.

Covered events with your loan cover or other payment protection

Involuntary redundancy, accidents or illnesses are the events that you can insure with a typical payment protection policy. You can by a policy that protects both, or you can by a policy that protects just one or the other. It is important to understand why you would consider only covering one event so you get the best protection.

Some people just protect for redundancy because their employers give them benefits for accidents or illnesses. Other people need to buy their own benefits for accidents and prolonged illnesses, but they save on premiums by not protection for redundancy. This is not always a good idea, but it can be in the right situation. If you have a high education or job skills level, you might be able to get work quickly. Perhaps you have savings to help you get through a period unemployment.

Carer cover is a unique protection that some providers include in your policy and sometimes at no extra charge. Consider the advantages of having this protection in your policy before you agree to buy a plan. This cover pays you the monthly benefits if you have to leave your job for a period time to take care of a sick or injured family member. For some, this might be the key benefit you rely on.

Compare independent insurers with financial institutions

The best way to get your best loan cover or payment protection option is to know where to go. Financial institutions are large banks that deal in many finance products. Independent insurance specialists are companies that have expertise in insurance and can be more helpful in your selection and claims processes.

Many consumers are also noticing that they can get much cheaper policies through an independent specialist. In fact, loan cover is generally about ten times more expensive if you get it from a financial institution. Mortgage cover is four times more expensive from a bank, and income payment cover is about five times more costly.

It is not just the price that makes the difference in value. Financial institutions have come under fire in recent years for some of their selling practices. Many would bundle their expensive loan cover and mortgage cover with loans and pressure borrowers into buying them with the loan. Others have used mis-selling tactics by selling policies to people not able to collect benefits.

The shape of payment cover changed in 2005, thanks to a super complaint by Citizen’s Advice, a leading consumer advocate group. The complaint addressed the bundling and mis-selling and it was addressed by the Office of Fair Trading, who, after an initial review, requested that the Competition Commission examine the sector further.

After its review, the Commission issued several recommendations for change in payment protection insurance. One of the resolutions is a seven day waiting period during which lenders cannot sell loan cover to new borrowers. This frees you to explore the market and get a better deal from an independent insurer. The Financial Services Authority fined many high street companies in 2007 that it found guilty of mis-selling. With the better rates and the improved awareness of the market, you have no reason not to consider protecting your family with a good loan cover policy.

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What is involuntary unemployment cover and how would I benefit?

When you take involuntary unemployment cover you are taking out one of the three forms of insurance, loan, income or mortgage protection to provide you with an income in the event that you were to lose your own income through involuntary redundancy. If you were to be unlucky enough to become a victim you would then have the insurance to fall back onto which would provide you with benefit which you would use towards being able to keep your repayments or outgoings up to date.

When applying for the policy you would have to bear in mind that you need to have been unemployed for a certain period of time in order to be eligible to make a claim on your chosen policy. This amount of time would depend on the provider so always check with them at the time of applying for the cover.

How much benefit would I receive from the policy?

You could choose how much of your monthly income or loan/mortgage repayments you wanted to protect when taking out involuntary unemployment cover in Glasgow. However the provider would have to agree to the amount that you choose as they would set a limit. This is your tax free income in the event that you had to make a claim on the insurance due to becoming a victim to redundancy.

Should you be taking out income payment protection you would usually be able to cover up to half of your gross monthly income or £1,500 whichever of these amounts was the least.

How long would the deferment period be before claiming?

Your provider might allow a claim to be made on your redundancy insurance after day 30 of your involuntary unemployment has passed. Other providers could ask that you wait for up to a period of 90 days and then make a claim on your insurance.

90 days can be a long time to manage without any benefits and this could mean that might fall into arrears and debts of some 3 months before seeing any money. With this in mind you could want to take out cover that pays sooner rather than later and check to find out if the provider backdated your benefit to the first day of your redundancy.

How long does the monthly benefits continue?

This again would differ with providers with some offering your involuntary unemployment cover in Glasgow that would continue paying out over a period of 12 months if you were to have to claim and need to continue claiming for this length of time. Others could offer you a policy that might payout, if needed, for up to a period of 24 months.
24 months cover would of course work out dearer in premiums as you could potentially claim for twice as long. You also have to spare a thought to the fact that whether you take out cover for 12 or 24 months if you should have to continue claiming for as long as the term the benefits would cease at that time regardless.

Could I claim for incapacity?

If you are just taking out a policy for redundancy then no you would not be able to make a claim if you were to become incapacitated. However you could offer to pay more for your monthly premiums and have incapacity protection too. You could then claim if you were to suffer from either of the events.

Check the terms offered by your provider to find out if you would be eligible to claim on your insurance if you were to have to give up full time work to stay home and take care of a loved one that became incapacitated. Carer cover might be offered by the more generous of providers but not all are generous enough to do so.

Ensure suitability before buying

You do have to ensure that an involuntary unemployment cover in Glasgow could be claimed against before you rush into taking on the cover. There will be some exclusions in the small print of any policy and these would need to be checked against your lifestyle as they can mean you would be unable to make a successful claim.

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This form of insurance exists to protect you against the unexpected loss of a job and the loss of income that will go with it. Of course you may get lucky and find another job immediately meaning that you wouldn’t need such insurance but it would be a brave person who relied on that as their only contingency plan.

Typically such contingency plans ARE needed. In today’s uncertain world it can take a long time to find alternative employment and therefore income. Unless you’re very lucky, your debts will quickly start to pile up and it won’t be long before you start to receive the threatening letters and perhaps even repossession notices relating to your car, furniture and perhaps even your house.

It is possible to adopt a philosophy of “I’ll let the government sort it all out if it happens” but that might be a very brave course of action! In reality the basic social unemployment benefits will offer little more than basic subsistence support and will do nothing to help you keep up a relatively normal life and your possessions where they belong – i.e. with you.

Even the government’s mortgage aid is limited. For a start if you hold savings above a certain level then you’re not going to get any help. Even if you are eligible, they will only pay a percentage of the interest of your mortgage and will offer no help at all with the capital. You will also have to find the balance of the interest yourself and will need the support and agreement of your mortgage lender to an interest-only payment period.

For many people, the above sounds too much like being hostage to fortune and they would prefer to have a plan in place that gave them greater certainty and control over their own affairs. To achieve that they turn to insurance that provides unemployment cover in Manchester.

These policies operate simply and effectively. If you lose your income for involuntary reasons they can pay you a monthly income of up to 1500 pounds or 50% of your gross income (the smaller of the two). This could be an invaluable cushion that helps keep your normal life going around you while you search for that new income.

The money can be paid to you each month or alternatively you could arrange for some of your loans to be paid directly such as the mortgage. This situation can continue until you find a job up to a maximum of 12 months though some policies may cover for up to 24 months.

One of the key words above though is ‘involuntary’ because these policies cover exactly that. You may wish to think carefully before losing your income due to your own actions that result in dismissal, voluntary redundancy, resignations or career breaks – because the unemployment cover in Manchester policy would be unlikely to cover those circumstances as they could not being seen as ‘involuntary’!

To obtain this cover you will need to be in permanent and verifiable employment – that need not mean full time though. The policy may specify a minimum number of hours per week that you need to work to qualify. Some policies may demand that you have been in the job for a minimum amount of time and others may say that you need to have held the policy for a qualifying period before any claims could be accepted.

You may also find it difficult to obtain cover (or have to pay more for it) if you are spending time working outside of the UK (this does not usually include occasional business trips) or in some types of self-employment.

You can find these policies via two major sources.

The lending companies sell this insurance but their prices are typically several times more expensive than those from the second source.

That second source is the Internet and the specialist providers of unemployment cover in Manchester than operate on it. They have a range of such products that will suit almost any set of requirements and the expertise to back that up. Having a look at their products and prices might be a good idea.

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Unemployment cover in Liverpool is a form of insurance that can provide a tax-free sum of money to cover credit repayments or other monthly outgoings. It is part of a family of products known as Payment Protection Insurance (PPI).

Payment protection insurance has a number of levels of cover. One level, Loan Protection will provide cover for one or more individual loan repayments. These could be for credit cards, car or home improvement loan etc. Another product, Mortgage Payment Protection Insurance has been designed specifically for mortgages. Yet another, Income Payment Insurance can provide you with a monthly lump sum replace your regular income.

For types of insurance related to specific loans including mortgages, the insurer would normally transfer the repayment directly to your loan account and you would not even need to be involved in the process. With Income Payment insurance however the lump sum would be yours to use as you see fit to best manage your monthly outgoings and commitments.

Payment Protection insurance is not restricted to circumstances changing as a result of redundancy only. For a little extra the cover can be extended to include loss of earnings as a result of incapacity to work due to an accident or illness. Likewise accident and illness cover is available without redundancy cover.

The amount of cover you may need will depend on your own personal, family and employment circumstances. If you are lucky enough to be in employment that already provides you with generous sick pay cover, then you may not need additional illness insurance and may opt only for unemployment cover.

It may be worth noting that although this form of insurance can be called ’unemployment’ cover, it only applies to unemployment as a result on involuntary redundancy. If you are unemployed because you resigned, were dismissed or accepted voluntary redundancy then a policy of this nature will not cover you. Some of these policies can provide cover in the event that you have to give up work to become a full-time carer for a close family member.

If you do become unemployed you should contact your insurer as soon as possible after the event to get things moving with respect to your claim. One of the first things you may need to do is to officially register as unemployed. Your insurers may insist on this and they will probably expect to see evidence that you are actively seeking work on a regular basis throughout the period of your claim.

Once your claim has been made you could expect to have to wait anything from between 30 and 90 days for payments to start. Following the waiting period, there are some policies that may backdate payment to the start of the claim. Others may not though and it may be in your best interest to carefully read the terms and conditions of your unemployment policy so you fully understand the position. This may also apply to your mortgage or loan company. They may be more sympathetic to a delay in payment if they are kept informed of what is going on.

Unemployment cover Liverpool is a form of insurance that has been designed as a short-term solution to what is hopefully a temporary problem. The maximum level or cover you can expect to find is 24 months although this is not the norm and 12-month policies are far more common.

The maximum amount of cover you could insure for per month is 1500 pounds or 50 per cent of gross monthly income. The actual amount you receive depends on the type of cover you buy. If you decide to cover a single loan or your mortgage for example, the amount your policy would pay would be the monthly repayment amount (up to the maximum limits). For mortgages any related buildings insurance can be included.

To be eligible for unemployment cover you need to be employed. This doesn’t have to be necessarily full-time but it should be permanent and the policy may specify a minim number of working hours per week to qualify.

You could buy unemployment cover in Liverpool at any of the big high street lenders but you may find that their policies are expensive. Another option would be to check out the independent insurance providers on the Internet. They specialise in this type of insurance and you may be surprised at how much cheaper their policies can be. It may be worth checking out further.

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Policies which protect against redundancy like this are part of the payment protection insurance market, and are therefore closely related to the deals which protect people’s credit cards and loan repayments. However, they are a little different because they are used to protect somebody who is let go by their employer, whereas some other deals will pay out if somebody is left without their wages due to illness or injury after an accident.

Unemployment cover in Scotland is seen as crucial by some workers because the welfare state system can prove inadequate. Disability and job seeker’s allowance may not be enough to help somebody who has a sizeable mortgage and other debts. Likewise, redundancy rules mean that people of a certain age and who have been working for a company for a set amount of time can end up with a package which would then get them through little more than a week.

Getting protected

This is why some people turn to personal insurance deals as a way of ensuring they would get viable support if they were told they would no longer needed by their employer. Someone simply pays a regular premium to an insurance company, who in exchange would pay them a monthly tax-free amount straight into their account to go on essential outgoings while they look for a new job.

The idea with the payouts is to allow somebody some breathing space with their regular outgoings, meaning they can perhaps better concentrate on finding suitable new employment. For some people redundancy could mean a poor credit rating in future, or even repossession in some circumstances. Unemployment insurance payments can help guard against this as people can often protect a sizeable slice of the current income.

While companies often don’t allow somebody to insure all of their wages, they often say somebody can protect to a certain percentage or top limit which will often be enough to cover someone’s essentials, or at least to provide viable support with them. The policyholder can often actually name the amount they would get per month, with insurance companies charging them more for the higher amounts.

Eligibility

To claim on the policy, someone will have to show that they have been made redundant involuntarily, rather than accepting an offer of redundancy, or been sacked from a job, or resigned. Crucially, the policyholder must have had no notification that they were going to be let go before they take out the policy, otherwise it will be invalid. An announcement, memo or phone call will often be enough to invalidate someone’s policy if they have received this before taking out the insurance.

But following a successful claim, someone’s monthly payments simply arrive straight into their account tax-free to spend as they wish. The first payment arrives 30 to 90 days after the successful claim, and this is a kind of exclusion zone which must pass before the cash begins to arrive. This can often be named on the policy, and somebody who has a 30 day waiting period will often pay more than somebody who has a 90 day period.

Someone’s payouts will arrive all the way through to the end of the policy limit if they don’t find work again within that time. Many deals payout for 12 months, while some will go as long as 24 months depending on the policy and the insurer. It should be made clear to the policyholder how long the payout period would be when they take out the insurance.

Unemployment cover in Scotland can often be bought from the usual well-known high street insurance firms but can also be bought by companies who deal specially in this kind of cover. In many cases these firms may prove the cheaper option, although this does not also typically mean that they supply inferior cover. As with those common car insurance policies, shopping around can help someone to get more for their money.

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The loan cover product is one of three products in the payment cover sector. The others are mortgage cover and income payment cover. All three pay monthly benefits that replace lost job income after a covered event. Despite this similar purpose, they do have some differences. Mortgage cover pays a benefit that helps with maintaining monthly mortgage repayments. Loan insurance is about debt management as it helps with personal loan and credit card payments. Income payment cover is used as a general income product that helps you meet various financial needs.

An overview of the payment cover portfolio

To better understand the payment protection sector and loan cover, you need to familiarize yourself with the common terms and conditions that affect the performance of your product. Among those important issues are: Eligibility, length of benefits payments, starting point of benefits payments, and the amount of cover.

Eligibility for loan cover benefits is fairly straight-forward. You are eligible for benefits if you are employed full time for at least six months. You are not eligible if you are employed on a part time basis or retired. Also not eligible to collect benefits are people dealing with pre-existing medical conditions.

Policies either pay benefits for a period of 12 months, or over the course of a 24 month period. This is an important consideration since you need to plan for how long you have protection should you be displaced from work.

Benefits payments sometimes begin as soon as 30 days after a covered event with some policies. Anyone on a monthly budget would appreciate a policy that pays benefits so soon. If you have other income sources or savings to fill the gap between your last regular pay and the start of benefits, policies that start to pay out at 60 days or 90 days after the event might work.

The highest amount of cover you can typically take on with a loan cover, or other payment insurance policy, is £1500 of 50 per cent of the normal monthly gross income, whichever is less. The benefits payments are tax free so the useable pay is more significant and should help sustain you through your unemployment period.

Covered events with your loan insurance policy

There are a couple main events that loan cover, mortgage cover, and income cover protect against. The first is involuntary redundancy. The other is accidents or illness. You can buy policies that cover both events, or you can elect to protect against just one event or the other.

Some people want to buy just the involuntary redundancy protection because they already have adequate illness and disability protection through their employer. Others just want the accident and illness cover because they want to save on premiums and feel comfortable with their financial situation should they be displaced. This only makes sense if you have money saved up and are confident you can find a new job pretty fast.

Along with these standard covered events, there is an additional benefit known as carer cover that many providers add to their policies at no extra charge. This benefit pays you monthly replacement income if you leave work to care for a sick or injured loved one. It is a nice plus for a broad cover.

Getting a great deal for loan cover

Independent insurance specialists are usually your best option for good value on payment cover plans. Loan insurance through a standalone provider is around 10 times less expensive than the alternative, which is a policy bought from a financial institution. Similarly, mortgage cover is four times less expensive and income payment cover is around five times cheaper. This savings makes a big difference to consumers.

Fortunately, many consumers now recognize the deals available in the open market. In years past, consumers overpaid for financial institution plans because they were unaware of their options. Large banks would use pressure selling tactics or deception by bundling their expensive payment cover policies with loan products. Many times, consumers would buy the policies with little thought about the actual cost and benefits.

The changes that improvement payment protection

Two major developments in the last several years have positively changed PPI. In 2005, Citizen’s Advice, a leading consumer advocate group, filed a super complaint with the Office of Fair Trading (OFT) that brought up mis-selling of policies by some banks to consumers unable to benefit. It also noted the bundling of loans and insurances that created a huge disadvantage to the consumer.

The Financial Services Authority (FSA) actually dealt strongly with the mis-selling practices when it issued fines against many known high street companies in 2007. These fines sent the message that mis-selling was to be ended. The agency continues to monitor the sector to watch for such mis-selling.

The OFT turned the payment insurance sector over to the Competition Commission for review. The Commission responded by putting together several recommendations for improvements. Among them is a 7 day waiting period that keeps lenders from bundling loan cover or other payment covers with a loan.

Now that consumers have the opportunity to get a great deal in the open market for payment cover, there is no reason not to explore your options. The depletion of mis-selling and the reduction of pressure tactics has given relief to consumers. Take advantage of the freedom to shop insurance specialists to get a better rate, better service, and better claims support. Your family will appreciate the financial security should you be in the undesirable scenario of being out of work.

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What will loan payment protection do?

Your loan payment protection insurance cover will payout an income each month for up to 12-24 months which will depend on the provider you chose to take your policy with. You do need to wait for so many days before making your claim which again depends on the provider you have chosen so you will have to pay attention to the terms on offer and compare them along with the cost of the policy.

How long do I have to wait before claiming?

The amount of days you will need to have been unemployed or incapacitated should be checked before rushing into taking out your policy. With some providers you can have to wait for up to 30 days before you can claim. With others this might be the 60th or 90th day.

How much benefit will I get back?

You will be able to choose the amount of your monthly loan repayment you want to insure and this will be the income that you are paid back each month. However there will be a limit as to the amount you can protect and this is typically around half your earned income of £1,500 a month.

Your income will then be paid as tax free benefit after the deferment period and for the term of the cover.

How long will benefit be paid?

You really need to check with the provider you are considering taking your policy with to find out how many months the policy will continue providing your income. Some providers offer 12 monthly payments before the policy will cease while others can continue providing you with an income for up to 24 months if needed.
Should your policy supply you with an income for 24 months then you will need to pay more out for the cover. You also have to bear in mind that once the term had been reached providing of course you had to claim for that long, it will stop providing your income.

Will you be eligible to claim?

There are always some exclusions to be found in loan cover and the amount will depend on the provider you decided to take out your cover with. For instance you will have to be living in the UK, the Channel Isles, or the Isle of Man to be eligible.

Some providers can include more exclusions than others so you will have to compare them at the same time as comparing the cost of a policy.

Possible exclusions you might come across

If you want to take out cover then with most policies you will need to be in full time work and have been working for a minimum period of 6 months prior to applying for your protection.
You will have to double check to ensure suitability if you suffer from an illness that is ongoing as you might not be eligible to claim if you were to become unable to work due to the illness.
You will also need to check the terms offered if you are self-employed as you will have to meet certain criteria in order to be eligible to make a claim.

Choose the events that you want to protect against

While you can take out protection for unemployment and incapacity in one policy you can also tailor the protection to suit your lifestyle. You can for example just need to take protection against unemployment alone. You might alternatively choose to insure your loan repayments for the chance of incapacity alone.
The events covered will go towards how much you will pay for the insurance which will mean that you will only have to pay for the loan cover that you wanted.

Other forms of cover you might consider

Mortgage payment protection insurance (MPPI) will be there for you if you have mortgage repayments to maintain each month. The policy will protect you in the same way as loan cover will, except it will protect your mortgage repayments.

Income payment protection will provide you with an income so that you can continue to meet any essential outgoings that you have to make. This can include your utility bills or rent for example.

Why a policy could be right for you

If you are relying on being able to make a claim for an income from the State then you should be aware that you will have to prove eligibility. You can also be surprised at the amount of income you might be entitled to receive as often it does not match your own.

Therefore you might still have to find money to continue meeting your expenses along with your loan repayments whereas loan cover will provide the income you chose to protect.

Looking for the best deal of your policy

When you shop around online you stand the best chance of getting the best deal for your loan cover. You can search and compare the cost of the policy and at the same time compare the exclusions and terms and conditions that can be found in any policy offered by any provider.

Brief benefits summary

• In the event of redundancy or incapacity, you will not have to struggle to find a large amount of your loan repayment each month as the policy will provide it
• You will know how much you will have coming into the home, how long the payments will continue and from when you can claim
• Your loan cover can be taken to protect against unemployment and incapacity together, incapacity alone or for redundancy alone, leaving you free to tailor make the policy that is best for you.

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