Redundancy Insurance options

Good points about the product

This is a very competitively priced redundancy cover product. Even if the insurer is aware of redundancy in the sector they rarely prevent new applications being accepted. For example, in the Armed forces many jobs are to be lost in March next year but as the terms have not been determined they will still take on a new policy.

The policy is open to those with or without a credit commitment whereas most short term income protection policies are limited to applicants who have just taken out a mortgage.

The maximum pay-out is a generous 65% of gross income up to £5,000 maximum per month.

There are various waiting period excesses to reduce the premium still further.

The policy is subject to a 10% renewal cap on premium increases.

Applicants that have an existing unemployment cover with another insurer can transfer to this one without having to wait the standard 60 days before a claim can be made.

Accident and sickness protection can be added onto the product at relatively little extra cost. There is no requirement to attend a medical and family history does not play a part in the decision making process. If you have had an illness in the 12 months prior to application. This is normally excluded for the first 12 months of the policy but can then usually be covered also. This is very generous feature and can capture a large sector of the population that are excluded from similar market products. For example, those with diabetes.

The accident and sickness cover is also available to all occupations including deep sea divers, scaffolders etc . The definition of the cover is ‘own occupation’ which is beneficial as you need to be able to perform the exact same job and if you can’t the payment of the cover continues.

The product has the best Defaqto rating for quality which is 5 Stars.

Bad points about the product

The premiums are higher if the product is accessed directly or through the comparison sites.

The benefit is paid out for a maximum of 12 months.

Applications for protection above £3,000 per month is subject to a slower process.

The product is postcode specific so areas with a high historic unemployment level are disadvantaged.

The policy is set up on an annual renewable basis so there is the possibility that the insurer will refuse future cover, particularly if you have been a serial claimant.

As with most redundancy policies the target market is employees without any shares in their business. Sole traders or Partnerships can apply but they will physically need to register that they have ceased trading and be on job seekers allowance (i.e. signed on) before a claim would be settled. This is therefore of little practical use as in my experience once clients have decided to become self employed they rarely give up even if the market hardens. Limited company directors with a share holding cannot apply.