In more difficult times a big announcement at work can sometimes mean a company is letting staff go. This can sometimes be when firms have to consider costs in order to safeguard the business, and people may be handed letters quite quickly depending on how the company’s fortunes are going. Being made redundant is not something anyone typically welcomes, but it can have bigger implications for some people than others, depending on individual circumstances. Those who have significant regular outgoings, like debts or mortgages, face a race against time to get back into work quickly, and in some circumstances can be in trouble quickly. But a straightforward redundancy insurance policy can help protect somebody from some of the more unpleasant effects of being let go.
This is a kind of cover which simply provides somebody with regular cash sums if they are ever made involuntarily redundant. It is not designed to replace their regular income, but to help somebody keep up with their commitments while they search for new employment. You can normally expect a proportion of your regular income, so a policy offering 50 per cent protection would payout £700 a month to somebody who is made redundant from a job which gave them a £1,400 a month salary. First payments normally arrive after a buffer zone has expired, perhaps 30 to 90 days after you have claimed, depending on the policy and the insurance company.
Once they do start to arrive they simply turn up in someone’s bank account as their wages did when they were still employed, and are tax-free. They are not another form of loan and are simply an insurance payout as you would get from other types of cover policy. The payouts typically remain the same over a set period, and will stop when you return to work. The limit of a policy payout period is normally between 12 and 24 months depending on the type of cover you select.
Typically you can expect to pay more the longer a policy is scheduled to pay out, and the higher amount of your income you wish to protect. Restrictions normally mean there is a limit on what amount of income you can insure with redundancy insurance, and it will be rare that you can protect say 90 or 100 per cent of your salary. This is mainly because they are designed to provide a stopgap, and not to replace your working income.
Redundancy insurance can be far superior to the state benefit system, which can provide somebody with barely enough to feed themselves with, let alone enough to keep up with a number of debt commitments. Therefore it is a serious consideration for anyone who is worried about how fast they would fall behind if they were ever told they were no longer needed in their job.
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