Two million people in Britain are currently out of work and the number continues to rise. As factories and offices close down and high streets around the country are denuded of many familiar shop fronts, it is clear that very few jobs can be regarded as safe from the ravages of the current economic recession. If it is your job that the axe falls on, however, you could be very glad of the safety and security of unemployment insurance.
Unemployment insurance cannot actually prevent you from losing your job, of course, but it can very effectively compensate you for the inevitable financial loss that redundancy will bring. Indeed, you can pretty well set your own level of compensation. Unemployment insurance will pay out a regular replacement income, free of tax, every month that you remain unemployed, up to a typical maximum of 12 months (although policies will vary in the maximum payout period available). The amount of that replacement income is decided by the policy holder at the outset and the upper limit is typically the equivalent of 50% of the policy holder’s normally earned income or £1,500 a month, whichever is less.
Clearly, this is generally sufficient to provide an adequate stop-gap income until a new job can be found, whilst the usual maximum of 12 months of such support is usually quite long enough a period in which to secure alternative employment.
The value of such unemployment insurance is borne out by the steadily rising tide of redundancies. Thousands of job losses seem to be announced in news reports every week. Indeed, in just the first 26 days of this year alone, some 50,000 redundancies were announced, making this a rate of very nearly 2,000 jobs a day.
Unemployment insurance might not take away the whole trauma and anxiety of redundancy, but it could certainly help you to continue to meet all the household bills and expenses that will continue to pile in, whether you are still in work or not. This form of insurance is widely sold as a tripartite form of cover against the risk not only of redundancy, but also of the financial losses arising from an incapacity to work as a result of an accident or illness.
Nevertheless, it remains possible to buy standalone unemployment insurance, without the additional cover against accidents and sickness. The premiums for such single-risk cover are correspondingly lower. Nevertheless, it is important to remember that all insurance is about the assessment of risk. As redundancies have spread so quickly and so widely through the economy, a number of insurers already appear to have withdrawn unemployment only insurance from the market and are selling only the accident, sickness and unemployment insurance package. It might be important to move fast to buy any remaining policies still offering standalone unemployment insurance.
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