Unemployment Cover Explained

Widely known as a lifeline for those people who have unexpectedly been made redundant, unemployment cover in the form of a payment protection insurance (PPI) plan provides short-term support in the way of financial assistance.

Simply put, unemployment cover provides significant financial assistance if you are unexpectedly made unemployed. The big drains on your income, such as a mortgage or a loan, can be paid by such a plan.

Unemployment Cover from Burgesses

Payment protection insurance provides a tax free monthly sum, typically for 12-24 month period, after the policy holder becomes involuntarily unemployed. The policy holder would not be covered if they took voluntary redundancy or were dismissed because of misconduct or simply because they hated their job!

Incapacity (such as recovering from an accident or where you are suffering from a prolonged illness) is also often covered by such plans for an additional fee, which explains the other name for this type of cover, ASU (for accident, sickness and unemployment).

With the financial climate experiencing a downturn which has lead to mass redundancies, people are turning to plans that protect them against unfortunate eventualities. It is particularly attractive to new homeowners, for example.

Many people over the last few decades have believed, wrongly, that the State would be there to pick up the pieces if the worst was to happen and they became unemployed. We know that this is not the case, and if any assistance does arrive for them, it is rarely the kind they want. This explains the rush towards unemployment cover, as people realise that preparing for the future is becoming increasingly important. They are finding that making plans now will pay off (literally) in the future.

When it comes to payment protection, buyers are able to choose from three distinct kinds of protection. These are income payment protection, mortgage payment protection, and loan payment protection. These three kinds of protection cover most eventualities, if not all of those that have the potential to occur in the average person’s working life.

Unemployment Cover

As regard pay-out times, the majority of the plans out there are structured so that you receive financial benefits at around the 30 to 90 day mark after unemployment.

This means that when the worse does happen, you do not have to wait too long for the first cheque to come in, and this leaves you with the opportunity to relax, and to make sure that you get on with looking for work.

Take care not to become too confused when buying such a product. They are all very similar. Literally hundreds of companies offer this kind of product now, and their similarity to each other can make the task of buying one quite daunting. Just focus on the benefits you will receive and see if they fit in with your circumstances.

Income payment protection insurance is the key product that puts benefits in place for those who become unemployed. If these customers took out a plan before unemployment, they can look forward to a regular replacement income for up to two years. This product is popular with those who are made unemployed due to the fact that it does offer peace of mind when it comes to those nagging bills that seem so much worse when you have less money coming in than before.

Mortgage payment protection insurance has some features that it shares with the previous product, but if you want to know how to differentiate them, just remember that the clue is in the title. This product is there to cover mortgage repayments. This means that the worst case scenario for many people (the loss of their home) can be avoided by taking out one of these policies.

Then there is the loan payment protection product. This covers all sorts of debt, but generally focuses on loan debt. Because many types of loan can be ‘rescued’ by this product, you will often find it being sold alongside a loan, as part of a package. This means that the insurance premiums are often added on to the cost of the loan repayments as a separate payment.

There has been a degree of controversy recently, with lenders saying to customers that loan protection is compulsory. This is, of course, not true. While it makes sense to have protection in place, you do not have to take it from the lender at the time or taking out your borrowing and you are free to shop around for the cover.

Families are now seeing the clear benefits they can receive if they use the independent market when it comes to such products. Prices here are very competitive indeed, and the amount of knowledge that independent brokers can supply is directly informed by a deep understanding of the wider market.
Certainly, buying your unemployment cover from a standalone provider will, historically, work out cheaper than buying a policy from a provider on the High Street. You may also get additional benefits within the cover not available with the mainstream providers.

Overall having unemployment cover brings benefits in that, for a low cost, it offers a considerable peace of mind. There are few things in life that are more stressful than losing your income, and having a service in place that provides payments against major monthly expenditure is infinitely preferable to saving money in the short term.

So, if you want a plan that pays out as early as the 30th day after you become unexpectedly unemployed, and that has low premiums, then it is seriously worth considering unemployment cover. By taking away the financial stress associated with unemployment, the policy leaves you free to concentrate on finding new employment.