The various types of unemployment
protection insurance

Many of us have experienced it – that sickening feeling as we’re handed the letter confirming that our services are no longer required. At that moment, it’s too late to start wondering about whether or not unemployment protection insurance would have been a good idea!

Unemployment – a permanent risk

Even if it ever did exist, today the safe job most certainly doesn’t. Your job could disappear at the stroke of a pen even if everything appears to be perfectly fine with your employer’s business.

Not only can losing our job damage our self-esteem, it also typically creates immediate financial worries about just how we’re going to cope.

Is help at hand?

In reality, you may be disappointed at just how little help is forthcoming.

The government’s mortgage help scheme may meet a proportion of the interest repayments on your home but it won’t help with the capital debt. You’ll have to meet some criteria to qualify and your mortgage lender would need to agree to accept interest-only repayments for a period.

Apart from that, there may be little or nothing apart from the typically modest amounts of social benefits.

Helping yourself

You can take out various forms of unemployment protection insurance (also known as redundancy cover). These all work to generate income for you in the event that you’re unemployed. They’ll help you meet a percentage of your bills while you search for replacement income.

There are two main forms:

• unemployment insurance – to give you a monthly income for up to 12-24 months depending on your provider if you’re made unemployed;
• accident, sickness and unemployment insurance (ASU) – this can also provide a monthly income but also includes cover for situations where you can’t work due to accident or illness;

Benefits and conditions

All two forms of unemployment protection could typically pay out sums each month to you of up to £1500, though this can vary depending on your provider.

There will of course be some conditions and it is important to read the policy details carefully.

In general:

• they only cover involuntary redundancy – voluntary redundancy, resignations, dismissals, career breaks and pregnancy, are all typically not covered;
• your payments will continue for typically 12 months, though this can vary depending on your unemployment insurance provider;
• you may have to produce evidence of both the reason for your unemployment and the fact that you are actively seeking work.

Being safe

Unemployment protection insurance may cost a little money but it could also help turn redundancy from a financial catastrophe into a manageable problem, leaving you free to focus on getting a new job.