Redundancy Protection from British Insurance
Some people might ask why it’s necessary to have redundancy protection insurance cover if there is government legislation in place requiring employers to make redundancy payments if they are forced to lay off staff.
The problem with statutory redundancy pay
The main problem with redundancy payments that employers are legally obliged to pay is that they are often so small and therefore unlikely to keep you financially afloat for very long after your final day at work. They will also depend on your age, the length of time you have worked for that employer and the amount you are paid each week.
The current rules for calculating statutory redundancy pay have been in place since 1st October 2006 and this is how the amount is worked out: if you are over the age of 41, you will be entitled to one and a half week’s pay for every year you have completed with your employer; if you are between 22 and 40 years of age, then your entitlement falls to just a week’s pay for each year worked; and if you are under the age of 22, you will receive just half a week’s pay for every year worked.
The maximum number of years of employment that you can count like this is 20, so even if you’ve worked for the same employer for 30 years, the maximum the employer will be obliged to pay is just 30 week’s pay.
Some occupations are specifically excluded for the provisions of this redundancy legislation. Share fishermen, for example, are excluded, as are the majority of public servants (civil servants and police officers, for example) whose contractual terms and conditions of service give them similar or enhanced arrangements.
It doesn’t take much arithmetic to see that the statutory minimum redundancy payment is pretty low. So low, in fact, that many trade unions and staff associations will have negotiated rather better terms for the members they represent. If you’re working for a smaller company or in a little-unionised industry, of course, these additional agreements are going to have scant benefit for you.
Why redundancy protection makes sense
Unless you’re a public servant (or share fisherman!), or are a member of a particularly active trade union, therefore, the level of redundancy pay to which you will be entitled as a matter of right under the law is minimal. And even where there appears to be a reasonable alternative to the statutory minimum, there will be many people who would prefer to have any provisions for their possible redundancy rather more in their own hands.
And this, of course, is precisely what redundancy protection provides you. It is totally within your own control. You choose how much income you would need each month in the event of your being made compulsorily redundant and you pay the relevant premium accordingly. There’s no argument or negotiation with your former employer about how much he should be paying you. The claim under your own redundancy insurance cover is just that – your own.
Redundancy insurance is the same class of insurances known as payment protection insurance (PPI). You pay the monthly premiums and, in the event of a prescribed set of circumstances – in this case your involuntary unemployment – the policy assures you will receive a monthly payout of benefits at a level you agreed from the outset. These benefits are payable for a maximum period of time, also agreed at the outset, and can be as short a period as a few months, one year or 24 months. The choice is very much up to you, but the longer the period such benefits would be payable, then of course the premiums will cost you more. It also depends on the individual provider’s policy terms and conditions.
Whilst redundancy protection insurance obviously covers just the risk of your becoming involuntarily unemployed, the other principal sets of circumstances usually included in payment protection insurance are sickness and accident (when you need to take time off work to recover and, once again, need a replacement income).
This type of cover can certainly provide you with peace of mind that should you become unemployed through no fault of your own, that you have adequate provision in place in order to survive financially for a period of time. This will allow you to focus on attending interviews and getting a new job, without the added worry of how to pay your bills.
So, what are your options? You might consider a standalone redundancy insurance cover only, however, if for example your employer offers an in-house group income payment protection scheme on behalf of its staff, to cover those periods when they need to take an extended period of time off work to recover from an illness or accident. Or you might have made alternative arrangements to cover the risk of long term ill-health or accident keeping you out of work for an extended period of time – critical illness insurance, for example. You may feel that in the event of short term incapacity you could use your savings to live off. It might simply be that, in your present circumstances, your means don’t quite extend to the full income payment protection that includes incapacity (i.e. sickness or accident), but that you want to protect yourself and your income against the risk of redundancy.
In any of these cases, redundancy protection insurance cover is effective, modestly priced and readily available from reputable independent insurance providers. In fact. these are the best people to approach for your insurance. As they are truly independent insurance providers, they are not tied into or dependent on any particular lender or mortgage company, so can offer you the right cover to meet your circumstances – without the high price tag of the high street redundancy protection insurance.
Get an instant quote for
mortgage payment protection insurance | loan payment protection insurance | income payment protection insurance
