Redundancy Cover Explained

Redundancy cover is a great form of insurance against losing your income due to being made redundant and this would leave you struggling when it came to pay your outgoings classes as essential. You are able to cover redundancy in a wide variety of ways depending on what you payout each month and your commitments.

Of course one of the main causes for concern would be your mortgage. If you get behind of your mortgage repayments the effects can be devastating. In the worst possible case you could end up losing your home to the mortgage lender if they decide to take you to court. The majority of lenders would allow you to come to an agreement with them to catch up on what you owe while at the same time continue paying the mortgage. Without an income this would be impossible and so they would have no option but to take repossession of your home. You can avoid this by taking out mortgage payment protection insurance, which is a form of redundancy cover. A policy taken for a small premium each month with a specialist provider would be based on the level of protection you need for your mortgage and your age.

Redundancy Cover from Burgesses

You would pay this out each month and then if while paying you lost your income due to being unemployed you would claim on the policy. You would have to wait for the deferment period set out in the terms but once you had done so you would then receive an income each month to cover your mortgage repayments. Usually providers would ask you wait either 30 or 90 days before claiming and a policy would then provide you with an income each month for either 12 monthly payments or 24 monthly payments. After this period of time the policy would just end, however it is usually adequate time to have found work. You would have peace of mind for the period of the payment which allows you to concentrate of looking for work and attending interviews.

If you have loan and credit card repayments to worry about then you are able to cover both of these together will loan payment protection. This policy would work in the same way as mortgage payment protection but it would provide you with the sum that you have to payout each month in loan or credit card repayments. Today many individuals rely on credit cards on a weekly basis as a means of getting by. They put bills which include shopping, petrol and anything unexpected that comes their way on the card and then keep paying the credit card bill when it becomes due. While earning an income this can work out fine, however if you are made unemployed and your credit card bills are substantial then this is when problems begin.

The same would apply to any loans taken out and there are different consequences to be met. All missed payments would earn you a bad mark on your credit rating. A bad credit rating means that lenders might turn your loan or credit card application down in the future. In fact obtaining any type of credit can be next to impossible. You could also be taken to court and earn yourself a County Court Judgement and if you have taken out a secured loan and cannot repay then the lender could choose to take you to court and seek repossession of your home. When you take this into account you can see why taking out redundancy cover is important. No one should class their job as safe even in jobs which were once almost guaranteed there is not more guarantee as companies, even the biggest names, fail and reduce their workforce by making redundancies.

Redundancy cover can also be taken out in the form of income payment protection. However you should not confuse this policy with income protection insurance. Income payment protection insurance acts as redundancy cover where income protection insurance does not. This policy would pay out for accident and sickness and would pay in different circumstances. For example there would be a long period of waiting but the policy would payout for up to the age of retirement. Income payment protection pays out in the shorter term, which is for either 12 or 24 months and then the cover would stop. It is however a very valuable form of protection when covering redundancy as it would provide you with a much needed replacement income. This income would be up to a certain amount of your own income which was set out by the provider.

Redundancy Cover

Income payment protection taken out as redundancy cover would allow you the peace of mind to continue paying your outgoings. Your replacement income would allow you to continue meeting your mortgage repayments when they were due and so keep the roof over your head. You would have the money for any loan/credit card repayments each month and not have to worry about falling into debt. You would have the money needed to pay such bills as food, heating, lighting and any outgoings which are needed in order to run the home. You would not have to consider which things to try and cut back on or deferring bills when they became due.

All forms of redundancy cover are cheaper when taking them with someone who specialises in offering paying protection insurance. You are usually offered loan and mortgage cover when you take on the borrowing with the high street lender. Usually this is a dear way of taking out valuable protection as the costs can almost double a cheap loan. In some cases when taking loan protection added into the borrowing the lender will add on the cost of protection and then calculate the interest on top of this.

Another downfall to taking out protection with the high street lender is that they often provide very little information regarding the policies they sell. In some cases individuals bought cover that they could not possibly hope to claim against which was highlighted in 2005 when the Citizen Advice made a super complaint to the Office of Fair Trading. Fines were handed out by the Financial Services Authority and changes for the better have already been made and more should be on the way. So, for a low cost option with comprehensive redundancy cover, a standalone provider is a good place to get a quote.