If you are in full time employment or self-employment you should consider the benefits of a redundancy cover plan. We are all vulnerable to the potential of involuntary redundancy and having 'a job for life' is no more. Unfortunately the rate of redundancy has risen fast since mid-2007 and the risk is currently the highest it has been for 11 years. For your own peace of mind consider how to minimise the possible financial impact of such an important event especially as according to research from the Post Office, most of us would need nearly £300 a week to support ourselves if we lost our job. Yet 40% of us have less than one month’s salary set aside and more than 70% have no unemployment cover.
Redundancy can happen to anyone at any time. Redundancy is different from being sacked; when an employee is made redundant their job or even the whole company seize to exist. “Sack” is when an employee is dismissed.
How can you protect yourself against involuntary unemployment?
Luckily you can now buy peace of mind in the form of Unemployment protection cover. Part of the payment protection insurance - PPI - family, redundancy cover provides a tax free monthly amount that can be used to help you manage financially in the event of involuntary unemployment.
Unemployment protection cover will help soften the blow of losing your job and support you until you are back on your feet and back in employment. Once you are made involuntarily unemployed, the policy will begin to pay out after a set period of time, and whilst this can vary among different providers it is typically from 30 to 90 days after redundancy.
What income level can you expect?
A typical plan will allow you to insure up to 50% of your monthly gross earned income, or up to £1,500 - whichever amount is the lesser, and when you compare this to whatever you may receive from the State, (not everyone is eligible for financial assistance from the Government if they are made unemployed), you'll appreciate how valuable this type of cover can be.
How long will the cover pay out for?
This varies from provider to provider but most policies will pay out for up to 12- 24 months, or until you get back to work - whichever event is sooner, giving you peace of mind in knowing that you are still receiving an income even when yours has ceased.
Why it's important to consider a policy
We've already mentioned that getting help from the State can be difficult and there are eligibility hurdles to jump. If, for example, you were unemployed and had mortgage commitments to meet, even if the State were to contribute towards your mortgage, it would only cover the interest part of the repayments.
Unemployment cover can be quite affordable and can cost from just a few pounds every month for every £100 worth of protection required. We can advise you on appropriate providers for your needs. This type of policy gives you financial breathing space at an already difficult time.
This Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneymadeclear.org.uk.