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Does Income Protection Cover Redundancy?
What is income protection and how does it work?
Income protection is a product in the life insurance family. It's designed to replace the majority of your wages (typically between 50% and 70% of them) if you're forced off and signed off work by a GP due to ill health or injury.
Unlike other life insurance products, income protection payments are typically made monthly (not in a lump sum) for as long as you need, and you can claim on income protection multiple times.
For a full breakdown of what income protection is and isn't please visit our quick guide to income protection insurance.
Does income protection cover redundancy?
In a word, no. Income protection policies only pay out during periods when you're still employed but a GP has signed you off work due to ill health or an injury that prevents you doing your job.
What does income protection not cover?
Income protection doesn't cover death, or if you retire, are sacked or are made redundant. Other products/ policies cover those things - life insurance and redundancy cover for example - but not income protection.
When would I need income protection?
Income protection can be a lifeline if you're ever signed off work due to ill health or because of an injury. Ill health and injuries are unpredictable so income protection is a backup if you need it. Hopefully you won't need it, but life's not always like that.
What if I want redundancy or unemployment cover?
These products exist and come as component parts of other life insurance products. It's worth taking advice on what you need and what approach is best. If you're in a job where redundancy is already being talked about - or unemployment is imminent - you won't be able to claim.
If you're self-employed or on a temporary contract it's unlikely you'll find cover, and worth noting that insurers are unlikely to pay out if you take voluntary redundancy.
Typically speaking, if you claim on a redundancy policy then payments will start after three months and last, in most cases, for only a year.
What insurance policies are available in case of redundancy job loss?
Mortgage payment protection insurance (MPPI)
Mortgage payment protection insurance will pay your mortgage if you can't, typically for a year. It's not redundancy or unemployment cover per se, but it pays out sufficient cash for you to cover what's probably your main overhead if you're unable.
Redundancy cover (often called unemployment insurance) exists both as a standalone product and as a component of other products such as mortgage payment protection insurance.
Life insurance exists to protect you. And no two people are the same. The best policy for you depends on where you are, what's going on at home, your health, your plans, your needs and your budget.
LifeSearch work with a wide range of top insurers so we can find perfect protection for unique you.
Reach out and we can start you on your journey.
A ‘Searcher since 2015, John is a Protection expert having worked in our customer facing teams and best practice teams, and now is immersed in Protection Content and Marketing.See all articles by John Rogers
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