Unemployment cover is a form of payment protection insurance (PPI). This product is most useful if you are faced with involuntary unemployment in the form of unforeseen redundancy.
Redundancy can be very stressful and the financial effects can be devastating especially if you do not have savings to rely on when your salaried income has ceased. The effects also extend to your credit profile in that if you have missed payments this could show up on your record. If it does it could make it more difficult for you to access low interest credit in the future.
It is not always possible to rely on statutory redundancy pay as the payout could be meagre to say the least, in addition there could be a long waiting time before you ever see a penny. As for borrowing from family and friends, they may be in the same position as you so the best bet may be to obtain unemployment cover.
Main Benefits
You will receive a monthly replacement income which is free of tax for a period of 12 or 24 months depending on the provider you choose.
This benefit can be linked to loan, mortgage or credit card payments so these bills will take priority when it comes to payments. If you have a standalone policy, you can use the benefits in any way you choose.
The peace of mind you receive is one of the best benefits of unemployment cover. You won’t have to spend sleepless nights worrying about impending bills and you won’t have to keep hiding from debt collectors.
Points To Consider
In order to be eligible to take out a policy you must be employed for a minimum period. This time will be specified by your provider. If you did need to make a claim there are deferment periods that you must adhere to as well.
The benefit you receive will not cover your entire monthly salary; instead the benefit is based on a percentage of your gross salaried income.
The premiums charged for this type of protection can vary widely so in order to obtain the lowest prices you might want to look at what independent providers have to offer. High street providers will charge a lot more for premiums but the benefits are not necessarily superior to that of independent providers.
As an example, British Insurance is an ethical protection provider that can provide savings of up to 80% on loan insurance products.
Conclusion
If you have unemployment cover you will no doubt know that the peace of mind is priceless. While you don’t want to go through the redundancy experience, it is much safer to have a back up plan just in case of this unfortunate event.
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