Depending on someone’s circumstances, particular debts might be at the forefront of their mind if they were ever made redundant from their current job. After all, it would be impossible to maintain things like a mortgage without a regular income, so when this is lost particular debts like this may be of the most significant concern. But beyond this most households also have a number of other costs to contend with, including the possibility of loan repayments, council tax, utility bills, grocery shopping and fuel. It’s easy to see why many people assume they are immediately going to fall on severe difficulty after losing their job. But something like a redundancy cover Scotland deal could provide them with a valuable helping hand, supplying cash payouts until they are working again.

Redundancy cover in Scotland is part of the payment protection insurance market, and is a variation of a number of different policies designed to help somebody keep up with debts and other costs in the event they lose their income through no fault of their own. Redundancy cover protects specifically against being let go by your employer, and pays a consistent tax free cash sum into your account after a successful claim. This is supplied every month and continues until the policy payout period ends, which can be 12 months or more.

A helping hand

The idea with this kind of insurance is to give you a kind of leg up until you have found a new job again. While it is not designed to replace your income completely, and may not be enough to protect all of your expenses, the payouts are often sufficient to give you a viable helping hand and keep you on your feet. How much someone gets can actually be decided by them, although insurers will not allow people to get an amount higher than a certain point. So for example, a company might say that somebody cannot receive more than £1,000 a month on a redundancy cover Scotland plan, or no more than 50 per cent of their wages, whichever is the smaller amount.

The point of this kind of cover is to fill the gap between what somebody typically needs to actually properly keep track of their commitments and what something like the welfare state provides. Also, redundancy packages may be inadequate depending on someone’s age and how long they have worked for a company for. Even if somebody does get a reasonable payout, it can dry up quickly, and put them in difficulty if they can’t find work again fast.

The monthly amount from a redundancy cover plan can be spent just how the policyholder chooses. This is crucial because it allows somebody to be flexible and prioritise the cash around what expenses are the most important. So somebody who is a mortgage holder might want to spend some of it on the home loan, a bit on utility bills, and the rest on essential costs like food. There is also nothing to stop somebody using some of it to pay off a loan or credit card bill, and you can even use it for refuelling the car to get to a job interview.

As it is a payment protection insurance product (PPI), this kind of deal has some similarities with other forms of personal financial insurance. For example, loan protection and mortgage cover are other variations, but which are tailored towards specific loans on which also normally protect somebody if they find themselves out of their income due to accident or illness. While basic redundancy cover does not normally do this, it is often possible to upgrade it to a different level so that it will also pay out for those who lose their income over time due to accident or sickness.

When do benefits start?

So when do payments arrive after you claim? Of course a claim has to be successful, but you will typically also need to wait a while as most policies like this incur an initial holding period before they start to pay out. This varies from 30 to 90 days, and the longer you would have to wait, the cheaper your insurance premium might be. One of the other deciding factors is exactly how much you decide to insure, IE how much you would get per month after a successful claim. The more you would expect from your regular payouts, the more you are likely to pay for the insurance. So somebody who would get £400 a month payout after a claim, will typically pay less than somebody who would get £800 per month.

When it comes to applying for cover, not 100 per cent of people will normally be excepted. This is because companies put common conditions on who can qualify for a deal. For example, they often ask that the applicant is at least 18 years of age, and has held down their current job for a certain amount of time, perhaps six months. The job they have got must also not be temporary, i.e. for a fixed term, and they may also ask that the person works in the occupation for a certain amount of time per week.

These are the usual workings of redundancy cover in Scotland, which are often more straightforward than some people imagine. It can be extremely useful to workers with significant commitments who would struggle if they lost their job to involuntary redundancy, helping them to keep up with debts which may be completely unmanageable if they did not have any insurance.

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