Protecting your Mortgage with Redundancy Insurance
Life is unpredictable, and few things are more stressful than losing your job. Redundancy insurance, also known as unemployment insurance or income protection insurance, ensures you have financial support if you face this unfortunate situation.
What is Redundancy Insurance Cover?
Redundancy insurance, often referred to as unemployment protection insurance, helps safeguard your finances if you unexpectedly lose your job.
In the event of redundancy, it provides a tax-free monthly payment, covering a portion of your salary while you search for new employment so that you can still meet mortgage payments or other loan obligations.
How Does Redundancy Insurance Work?
With redundancy insurance, you pay monthly premiums, and if you're made redundant through no fault of your own, you can file a claim. Upon approval, you’ll receive tax-free monthly payments until you secure new employment or reach the policy’s end.
There’s typically a ‘deferred period’ - a set waiting time before payouts begin. To make a claim, you'll need to provide proof of income, expenditures, address, and identification. Most policies offer coverage for up to 12 months, paying up to 70% of your pre-tax salary, though higher earners may face payout caps.
Types of Unemployment Insurance
There are several types of insurance policies that can protect you in the event of job loss:
STIP (Short-Term Income Protection): This standalone policy replaces a portion of your income for a set period if you’re made redundant, helping you manage essential expenses.
MPPI (Mortgage Payment Protection Insurance): Specifically covers your mortgage payments after job loss, ensuring you can keep up with housing costs during unemployment.
PPI (Payment Protection Insurance): Designed to cover loan or credit card repayments when you're without income, reducing the risk of debt.
When Should You Think About Buying Redundancy Insurance?
You should consider buying redundancy insurance if there's a potential risk of redundancy, but before receiving any formal notice. Insurers usually won’t offer coverage if you’ve already been informed of an impending redundancy. It's also worth considering if you believe it might take longer than three months to secure new employment after losing your current job.
What Is The Exclusion Period for Redundancy Insurance?
Before purchasing redundancy insurance, make sure you fully understand the exclusion period - this is the initial waiting period stated in your policy during which you cannot make a claim. It can last up to six months from the policy's start date, meaning if you're made redundant during this time, you won’t be eligible for payouts.
What Isn’t Covered by Redundancy Insurance?
Before purchasing unemployment insurance, it’s important to understand what is not covered. Generally, coverage only applies to circumstances beyond your control.
For instance, redundancy insurance won’t cover you if you voluntarily leave your job or are dismissed for misconduct. It also won’t apply if you accept voluntary redundancy or if your role was already at risk due to restructuring. Additionally, finding coverage can be challenging if you’re self-employed or on a zero-hour contract.
Is Redundancy Insurance Worth It?
Yes, redundancy insurance can be highly valuable, especially if your family depends on your income and you lack significant savings. Redundancy is often unexpected and can happen at any time.
If you have a mortgage, credit cards, or other debts, redundancy cover can help you manage your repayments while you're unemployed. It also allows you to avoid late payment fees and damage to your credit score.
How Much Will I Pay for Redundancy Insurance?
The cost of redundancy insurance depends on several factors, including your employment status, income, health, as well as the length of coverage and deferred period you choose. Premiums may vary based on these variables.
To find out how much you’ll pay, use our quote generator to get a personalised redundancy insurance UK estimate!
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.