How will you be able to maintain your rent, your mortgage or loan repayments or even just day to day living costs in the event that you were made involuntarily redundant? Well, if you have one of the forms of redundancy cover to fall back onto then you will at least have a substantial sum of money coming in towards being able to do so.
How does redundancy cover work?
Redundancy cover can be taken as either income payment protection insurance, loan payment protection insurance or mortgage payment protection insurance (MPPI). Any of these polices could be claimed on if you lost your job to redundancy. You will have to be redundant for a period of time before claiming on the policy and you then continue to receive that income for up to so long before the policy ceases. The income will help to cover the repayments or outgoings that you had chosen to protect when you took out your policy.
How much income could I get from my cover?
At the time of taking out your policy you will choose how much of your own income or your mortgage or loan repayments that you wanted to protect. This amount will need to be agreed by your provider as they all set a limit as to the maximum you will be able to protect. The agreed sum of money is then your tax free income if you should have to claim due to being made redundant. Generally you will be able to protect up to half of the gross monthly income that you earn or up to £1,500 whichever amount was the least.
When will I begin to receive benefits?
This will be dependent on your provider with some offering to pay out if you needed to claim once the 30th day of unemployment had passed. Others could begin to pay out once you have been unemployed for 60 days and with others it could be as long as the 90th day before you could claim. Therefore you will have to check in the terms and conditions your provider offered to ensure you knew and to find out if they will date back your income to the first day that you became unemployed.
How long will I have to find work?
Again this differs with the provider. There are some that offer redundancy cover that will pay benefits over 12 months if you had to claim this long. Another provider might allow you 24 months to find work before the policy will cease supplying your income. However you will need to pay more in premiums each month if your policy was going to continue for up to 24 months so check this when applying.
Consider adding in incapacity too
When you take out your redundancy cover you could also add in protection against incapacity for a little more in premiums each month. This will mean that your chosen repayments will be protected against the possibility of losing your income to incapacity or unemployment. You should also check with the provider as some will include carer cover in their protection. This means that should you have to stop working to take care of a family member you will be eligible to make a claim on your policy.
Is redundancy cover suitable for everyone?
Just like any form of insurance you take out redundancy protection does come with some exclusions and these have to be checked before you take out the insurance as they could stop you from being eligible to claim. For instance you need to be working full time and have been doing so for a period of 6 months at least before you take out the policy.
There could be quite a few exclusions in your cover or the provider may add in just the most frequently found ones. Therefore you will need to check the small print at the time of taking your chosen policy.
The various forms of redundancy protection
You could take out redundancy cover in the form of income payment protection. You will then be able to use the income provided from the policy in any way that you wanted. You might choose to use some of it towards the rent, you will also have money to use towards your grocery bills each month.
Should you have mortgage repayments to service then you could take mortgage payment protection. This policy will provide you with an income that you could use towards maintaining your mortgage repayments and so keep out of mortgage arrears.
Loan payment protection will provide the same protection for your loan repayments. You will not have to struggle to find the money needed each month as the policy will provide a substantial sum towards it.
How to get the best deal on a policy
You can take out redundancy cover with the lender on the high street. However if you do then you could pay way over the odds for the insurance. Shopping around with payment protection specialists is one of the best way to ensure that you get the cheapest premiums. You can compare the cost of insurance which in some cases could mean you get your policy for up to 40% less for mortgage cover, 80% less for loan protection and get competitive quotes for income protection.
Why take out redundancy protection?
You could of course rely on being able to claim an income from the State while you find work. However you will have to be eligible and if you were you have to bear in mind that you will need to stand to the first 13 weeks before seeing any money. You also have to consider that you will only get help towards the interest part of your mortgage repayments and only up to so much. You might also not get anywhere near the income you got when working.
A summary of the benefits
With redundancy cover you will know how much you have to rely on whilst looking for work, when you could claim your income and for how long it will last. This provides you with security while you go out and search for and secure another position. There is not the gamble and risk associated with applying for an income from the State or having to rely on savings to get by. If you take the time to shop around and compare the cost of a policy with an independent provider you can be sure of getting competitive premiums.
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