This type of insurance only covers periods when you're classed as unemployed. It doesn't cover absences due to health issues.
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Unemployment insurance provides financial security if you lose your job
Unemployment insurance can help you stay on top of the bills if you find yourself out of work. Cover from £8.29 a month*
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*Based on an accident, sickness & unemployment level of cover for a 30-year-old non-smoking male (March 2023)
What is unemployment insurance?
Unemployment insurance is a type of income protection insurance policy. It is often referred to as employment protection insurance or work insurance.
This type of cover provides financial security if you become unemployed due to redundancy. In this situation, your insurer would step in and pay you a monthly income.
Read more about income protection insurance.
How does it work?
You take out a policy and pay premiums each month. In return, you can make a claim if you become unemployed providing that:
You are not at fault for your unemployment
Monthly premiums have been paid on time
The initial claims exclusion period has run its course
When you make a claim, you usually need to provide proof of identity and address, along with evidence of your income such as payslips or confirmation from your previous employer. You may also need to list any financial commitments, including a mortgage, rent payments or dependents.
Do I need unemployment insurance?
If you're employed with a business, it's always a possibility that you could lose your job, whether it's because of external economic factors or a change in the business’s priorities.
And if you've not been able to save up for an emergency fund to get you through periods of unemployment, then unemployment insurance could help you through the lean times.
This is especially useful if:
You have a mortgage, or other debt to repay
You have children
Your emergency fund isn't enough to cover all your bills
Remember that the point of income protection is not to improve your financial circumstances, but to get you through a difficult period.”
What types of cover does unemployment insurance provide?
Unemployment protection
This type of insurance only covers periods when you're classed as unemployed. It doesn't cover absences due to health issues.
Accident, sickness and unemployment
This insurance covers absence from work due to unemployment, illness or injury.
What types of cover does unemployment insurance provide?
Unemployment protection
Accident, sickness and unemployment
This insurance covers absence from work due to unemployment, illness or injury.
How much income protection do I need?
The amount of income protection you need depends on your monthly outgoings, including things such as mortgage or rent payments, credit card payments, utility bills and food costs.
If you add up all of this, you can calculate how much protection you need to survive while you're unemployed.
When working out how much you need, it's worth bearing in mind that the point of income protection is not to improve your financial circumstances but to get you through a difficult period and cover your most important expenses.
This is the reason insurers only pay out a percentage of your income – often up to 65%. Plus, the lower the level of cover you ask for, the lower your premiums will be.
Levels of cover
There are two main types of unemployment cover:
Level cover: your payments and premiums are fixed for the term of your unemployment insurance policy
Inflation-linked cover: your payments and premiums increase each year, in line with inflation, until your policy ends
How to choose an unemployment insurance policy
It's essential to consider several factors to ensure you get the best coverage that suits your needs. Here are some steps to help you compare these policies effectively:
Identify your needs
Determine your specific requirements and priorities for unemployment cover. Consider factors such as the desired benefit amount, waiting period, policy duration, and any additional features you may want.
Research insurance providers
Look for reputable insurance companies that offer unemployment insurance in the UK. Consider their reputation, customer reviews and financial stability. Make a list of potential providers to compare their policies.
Compare policy details
Review the policy documents of the shortlisted providers. Compare the coverage details, including the benefit amount, waiting or deferred period (time before benefits start), maximum benefit duration, and any exclusions or limitations.
Check premiums and costs
Compare the premiums for each policy. Ensure that the premium is affordable and fits with your budget. Also, consider any additional costs, such as one-off fees or charges associated with the policy.
Read customer reviews and seek expert advice
Look for customer reviews and ratings online to gauge the experiences of other policyholders with the insurance providers you're considering. Additionally, consider seeking advice from insurance experts or financial advisors to get insights and recommendations based on your specific needs.
FAQs
Can I get income protection if I am self-employed?
Yes, you can get income protection if you are self-employed. You will need to prove your income if you claim by providing accounts or other evidence.
When does it pay out?
To get a pay out, you’ll need to make a claim that’s accepted. Once done, you should be sent any income missed up to that point (subject to any deferral period), followed by monthly payments until you’re able to return to work.
Can I cover 100% of my income?
Yes, you can cover 100% of your income but insurers usually set a maximum amount. You might, for example, be offered a policy that would pay out 100% of your income, but which is capped at £30,000 a year.
Does income protection payout if I die?
No, income protection does not pay out if you die. You should look for a life insurance policy to provide for your loved ones should you die. Income protection solely covers your income for the duration of your policy.
Does income protection cover unemployment?
Income protection sometimes covers unemployment. It will cover you for a period of unemployment following the loss of a job or other earnings as a result of sickness, injury or disability. However, it might not cover you if you lose your job as a result of redundancy.
How long will it pay out for?
Income protection insurance typically pays out for up to 12 months, or until you secure a new job.
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