Redundancy insurance, also known as unemployment insurance, is insurance that can pay you a tax-free monthly income, which starts after a pre-agreed waiting period, if you lose your job. In this article, you will find more information about redundancy insurance and comparisons to understand how it can work for you.
Income protection: Redundancy Insurance
Redundancy insurance, also known as unemployment insurance, is a short-term income protection policy providing cover for up to 12 months should you be unable to work due to involuntary redundancy. It can cover a wide range to fit your environment and needs due to an unexpected situation. For instance, it can protect things like your income, mortgage payments or credit card repayments.
What is a redundancy insurance and unemployment cover?
Redundancy insurance, also known as unemployment insurance, is insurance that can pay you a tax-free monthly income, which starts after a pre-agreed waiting period, if you lose your job. If possible, it is good to consider other income protection or life insurance that may help with coverage instead.
How does redundancy insurance work?
Redundancy insurance is coverage that can provide peace of mind if you and/or your partner become both without a job. It can help cover your bills, including your mortgage or any debts, while you’re not working.
If you have purchased redundancy insurance and then lose your job, you will be paid a tax-free monthly income, which starts after a pre-agreed waiting period. This is called the deferred period. If you’re able to wait a while before receiving money during this deferred period, you will end up with a lower premium. Due to this big impact, it’s important to look into how long you can wait before receiving the funds.
There are other factors that weigh into what type of redundancy insurance you should purchase for you and potentially your family. You may want to consider if you need to cover a loan, mortgage, or debt repayments. Additionally, you may consider how much of your salary to cover during this period. You can insure up to 50% of your income on a monthly basis. If you need more than 50% covered, it will also require a higher premium.
Lastly, there are other factors involved with your employment that impact the type of redundancy insurance you can receive. It depends on the length of time spent at said employer, if you voluntarily left the company or had to leave due to misconduct. These factors may lead to less coverage or even a denial of coverage.
What is the best redundancy insurance?
The best redundancy insurance depends, of course, upon your own situation and level of coverage. Here’s some information that will help determine the best kind of redundancy insurance for your own situation. It’s also recommended to work with an insurance provider to explain your current (or anticipated) work situation and what level of coverage is necessary if you and your partner became redundant.
You should consider if you need to cover a loan, mortgage, or debt repayments. You may also want to consider how much of your salary to cover during this period. You can insure up to 50% of your income on a monthly basis. If you need more than 50% covered, it may be possible but will also require a higher premium.
Lastly, there are other factors involved with your employment that impact the type of redundancy insurance you can receive. It depends on the length of time spent at said employer, if you voluntarily left the company or had to leave due to misconduct. These factors may lead to less coverage or even a denial of coverage.
How much does redundancy insurance cost?
The cost of redundancy insurance depends on many factors, ranging from your age to lifestyle to total earnings and even if you have a family. One example is that someone in their twenties with no mortgage or family will have a lower cost compared to someone in their thirties with a mortgage, family, and higher earnings to consider.
While it is hard to predict the exact costs, these are a few areas that will impact your cost. They include:
- Age
- Martial Status
- Tobacco / Nicotine use
- Lifestyle
- Health
- Profession
The coverage that you need may depend on a multitude of factors. They may include the following:
- Earnings
- Daily costs of living
- Debts
- Mortgage
By considering both of these sections – your impacts and your covers – you can start evaluating what the best redundancy insurance could be for you, and even the potential cost. For example, if you fell ill for a temporary period of time, what are the costs that you will still need to cover?
What is redundancy insurance for the self employed?
While you are not eligible for statutory sick pay or redundancy pay when you’re self-employed, you can apply for income protection insurance. This type of insurance will pay you an income if you cannot work due to an injury or illness.
These policies will pay a monthly income until you return to work or for a fixed period (typically 12 or 24 months). It’s important to consider the income that you want covered, and for how long you want this coverage.
Are redundancy insurance payments taxable?
According to Gov.UK, from 6 April 1996 payments received from policies taken out to protect a person from sickness, disability or unemployment will generally be tax free where the premiums were paid out of taxed income. This means that redundancy insurance payments are generally tax free, if you pay the premiums from your own net income.
If your redundancy insurance (or income protection insurance) premium is paid via your business, then it means that the benefits are paid out to the company and would be subject to tax. If this is the case, it is best to consult with a tax accountant to further understand what money is owed in taxes.
What is redundancy insurance with no waiting period?
The waiting period for redundancy insurance, sometimes also called the deferred period, is the time you wait before being paid a tax-free monthly income. The longer this period is, the lower your premium, so it’s worth looking at a couple of options and calculating how long you could wait before receiving the funds.
If you wanted coverage with no waiting period, the premiums may be extremely high. It’s important to consider the costs that will need coverage, for example any debts, mortgage, or any portion of your salary as well. It is possible to insure 50% of your income on a monthly basis (or even higher, like 70% tops) but the more money that you need, the higher your premium will be.
Lastly, if you work for an employer, it’s important to research what amount you could be paid if you were made redundant. If you haven’t been with the company very long you might not receive much, and would need to find another job almost immediately in order to keep on top of your outgoings.
What is redundancy insurance for your mortgage?
If you find yourself redundant at your job, or are unable to work due to an illness or injury, redundancy insurance can help cover your mortgage payments during this time. If you specifically need assistance with your mortgage, it may make sense to look specifically into mortgage payment protection insurance plans, or MPPI.
The typical MPPI policies will cover mortgage payments for up to two years and will pay up to £2,000 a month or around 65% of your monthly income (whichever is lower), providing protection when you need it most.
MPPI policies are not straight forward, and there are a lot of important conditions and restrictions to consider before moving forward with your plan. There is different coverage recommends if you’re under 50 years of age vs if you’re over 50 years of age. There are restrictions if your redundancy is voluntary, or foreseeable. For example, childbirth is not covered under this policy. The type of work – either self-employed, employer, contractor, etc – will also make an impact on your options.
Finally, the waiting period before the policy kicks in makes an impact on your premium. If you need the monthly income to start within 30 days of receiving the plan, it will be much higher premiums compared to a longer waiting period.
What is the best income protection insurance in the UK?
According to BoughtByMany, there are several top income protection insurance companies available. It’s important to compare the results to see which insurance fits your specific need and circumstance. A few of the top income protection insurance providers include the following:
- Aviva
- Connells
- CountryWide
- LV=
- Nationwide
- VitalityLife
In addition, these providers will take into account how long you’ve been at your job, how many hours you work, your current occupation, residential status and whether you use tobacco or nicotine products that impact your overall health. This may impact what is the best option for you with your income protection insurance.
For comparing top income protection quotes, you can use ActiveQuote to compare some of the top insurance providers.
To secure extra income you could also drive as an Uber taxi driver which requires a taxi insurance.
What is cheap income protection insurance in the UK?
The most affordable income protection insurance option depends a lot on your own needs and circumstances. It’s important to research and compare your options to find the best fit for you.
For income protection insurance, there are three options for coverage:
- Accident and sickness only
- Unemployment (redundancy insurance)
- All of the above (ASU)
Although it can pay up to 50% or even 70% of your income, keep in mind that a higher amount will increase your premiums, and it will lower your choice of providers.
Providers will take into account how long you’ve been at your job, how many hours you work, your current occupation, residential status and whether you use tobacco or nicotine products that impact your overall health.
By using sites like GoCompare, you can start evaluating your options to find the most affordable and best fit for you.
What is short term income protection insurance?
Short-term income protection insurance is a policy designed to cover if you’re unable to work for a fixed period of time, anywhere from six months up to twelve months.
Just like normal income protection insurance cover, there are three options for coverage:
- Accident and sickness only
- Unemployment (redundancy insurance)
- Accident, sickness and unemployment (all the above)
Short term income protection is designed only if you’re temporarily out of work. If you believe you will be permanently out of work, then this is not the coverage for you. For example, breaking an arm at home and needing to be out of work for a few months would qualify. However, becoming seriously ill without having a date to return to work does not qualify for short term income protection.
What is an online quote for income protection insurance?
For income protection insurance, there are three options for coverage:
- Accident and sickness only
- Unemployment (redundancy insurance)
- All of the above
Income protection insurance can pay out up to 70% of your gross annual income. If you do want the full 70% covered for your insurance, the premiums will be higher. To find your quote, check online to see how much coverage makes sense for your own situation.
Providers will be taking into consideration the following:
- Number of hours worked
- Length in employment
- Occupation
- Residential status
- If you use tobacco and/or nicotine products
What is mortgage redundancy insurance?
Mortgage redundancy insurance, often known as Mortgage Payment Protection Insurance (MPPI) is a policy to help make payments on your mortgage due to redundancy, among other reasons.
What is mortgage protection insurance with unemployment?
As mentioned above, mortgage redundancy insurance, also known as Mortgage Payment Protection Insurance (MPPI) is a policy to help make payments on your mortgage due to redundancy. Besides unemployment, there are other reasons that you may not be able to pay your mortgage, including an accident or long term illness.
Before obtaining this policy, it’s important to first research if you’re covered in other ways. You may be entitled to get help from the government on your mortgage – you can check here at Gov.UK. You may also be covered by your employer for sick leave or other circumstances, especially if you’re working in the public sector. Finally, it’s important to check your other insurance coverage, including health insurance, to make sure that you’re not already covered, or partially covered, by another coverage plan.
Mortgage Payment Protection Insurance can be complex, so it is important to contact a representative to review and compare the best policy for you.
What does mortgage redundancy insurance cover?
Mortgage redundancy insurance, often known as Mortgage Payment Protection Insurance (MPPI) is a policy to help make payments on your mortgage due to redundancy, among other reasons.
According to MoneySavingExpert, the typical policies will cover mortgage payments for up to two years and will pay up to £2,000 a month or around 65% of your monthly income (whichever is lower), providing protection when you need it most. It’s important to understand exactly what you need covered, your situation with your employer and most importantly: talk to a specialist who can help determine if Mortgage Payment Protection Insurance (MPPI) is the right direction for you.
Compare the Market: Redundancy insurance and Income protection insurance in the UK
The easiest way to get cheap redundancy insurance is to use one of the many online comparing services. We have listed some of the major players below:
Redundancy insurance according to Martin Lewis (money saving expert)
For more information on redundancy planning and insurance, check this website for a step by step guide on how to plan for unemployment.
Read more: Martin Lewis from MoneySavingExpert
Income Protection Insurance at Money Saving Expert (Martin Lewis)
For more information on income protection insurance and mortgage payment protection, check out this website for detailed information depending on age groups.
Read more: MoneySavingExpert
Income Protection at GoCompare
For more information on income protection, including FAQ on the policies and coverage and the ability to compare quotes, check out this website.
Read more: GoCompare
Selected providers of redundancy insurance in the UK
Here is a list of some selected redundancy insurance providers:
Redundancy Insurance at Aviva
Aviva, one of Britain’s largest insurance providers, offers car, home, travel, and life insurance – along with savings, investments and pensions.
Read more: Aviva
Income Protection Insurance at Aviva
Aviva, one of Britain’s largest insurance providers, offers car, home, travel, and life insurance – along with savings, investments and pensions.
Read more: Aviva
Redundancy Insurance and Income Protection at HSBC
While HSBC does not have redundancy insurance, there are a few options for income protection insurance in their LifeChoices Insurances section. This includes coverage if you’re unable to work due to illness or an injury.
Read more: HSBC
Redundancy Insurance and Income Protection at Barclays
Barclays is a bank account that provides a variety of services in the UK, including online personal and business banking, investments, loans and insurance coverage.
Although Barclays does not have a redundancy or unemployment protection insurance section, they do offer life insurance and mortgage protection insurance.
Read more: Barclays
References
https://www.comparethemarket.com/redundancy-insurance/
http://www.gocompare.com/unemployment-protection/
http://www.moneysavingexpert.com/mortgages/payment-protection-insurance
http://www.gocompare.com/income-protection/short-term/
https://boughtbymany.com/news/article/best-income-protection-insurance/
https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm6110
https://www.money.co.uk/income-protection-insurance/self-employed-income-protection.htm
