Unemployment Insurance from British Insurance
While involuntary unemployment has not been that rife over the last ten years’, is can still occur, and can certainly be devastating if it happens. But with an unemployment insurance policy, you will have the financial peace of mind that should you become unemployed, you will still receive an income with which to service your monthly debts and ongoing lifestyle costs.
Unemployment insurance is one of three types of insurance policies under the umbrella term payment protection insurance (or PPI for short). This innovative insurance will protect your income should you become unable to work due to unforeseen unemployment. It provides a tax free lump sum each month if you are suddenly out of work through becoming unemployed due no fault of your own – ie involuntary redundancy. Dismissal or deciding to change jobs does not count as a reason for a valid claim.
You can also add on additional benefits under the payment protection insurance umbrella and cover for becoming unable to work due to long term illness or when you are unable to work due to recuperating from an accident. This will, of course, attract a higher premium but does give you a great deal of protection against anything that life can throw at you!
Surviving on State benefits is not something that most of us aspire to, and, if your profession seems relatively safe, you may think you will never need to ‘go on the dole’. However, in the current economic climate, many of us may start to feel a little worried and jittery about the prospect of losing our income due to involuntary redundancy.
By having some form of unemployment insurance in force, you can ensure that you will still be able to meet your monthly costs, such as your mortgage or rent; credit card and loan repayments; and even your food bill. It will certainly take the pressure an already fraught situation.
Hopefully, if the time ever came, your employer would give you a long period of notice in which to find a new job, but they may not. Also, depending on your individual situation, you may genuinely be unable to find an alternative source of work.
That is why unemployment insurance can save you the stress and headache of financial distress. Being unable to pay your monthly loan and credit card commitments, creditors may start harassment of you and, in the worse case, you could even lose your home. If the worst came to the worst, you could always join the dole queue, but State benefits are much less of a safety net than many people think.
Welfare State's Inadequate Safety Net
The Jobseekers allowance in the UK is paid to unemployed people who are actively seeking employment. However, not everyone would be able to qualify, such as those people aged 60+. And even if you are eligible for State benefits, typically you’ll receive just £60 per week or so. Could you pay your mortgage and other essential costs on just £60 a week? It is a frightening thought and one that highlights just how important unemployment cover can be.
Of course, as with all insurance policies, there are exclusions which would prevent you from being eligible to claim, such as being in part time employment only or past retirement age.
Only a Quarter are Covered
Although a good number of us have thought about getting unemployment cover, few of us actually do – research has shown only around a quarter of people in the UK have their own unemployment cover. Most people prefer savings and investment as a safety net against the dreaded redundancy letter.
Unemployment insurance is another term in a sea of payment protection insurance terms. Remember what it is intended for – if you find yourself out of work through no fault of your own. Unlike general payment protection policies, it guards against one type of circumstance, rather than dozens. Unemployment cover could also be seen as quite specialist as with many firms the term relates to a policy that can cover people who are self employed – it could be a lifeline for those who have chosen to go it alone.
Should you been unfortunate enough to need to make a claim, then the policy would tend to start paying out anywhere from a month to three months after you became unemployed, or unable to work due to accident or illness if you took that additional benefit.
Most redundancy insurance policies run for 12 -24 months – how long you are covered for will depend on the individual provider’s policy terms and conditions, so do check out the small print to ensure you fully understand the coverage on offer.
Cost wise, always go to an independent provider as they, historically, offer the lowest priced cover and, in some cases, enhanced benefits compared to what is on the high street.
Finally, a word of warning, or two. Unemployment insurance is a part of the payment protection insurance market, still under investigation from the Competition Commission in the UK. This started after some operators were found to be mis-selling policies to people who did not really need them. However, this often applied to transactions from major high street banks and building societies who have been known to try to sell forms of payment protection cover when people take out loans – often charging a very high price. A standalone unemployment policy is less likely to be sold in this way – but take care none the less and insure you try smaller, standalone firms for quotes too before making a decision. Remember the welfare state is unlikely to be able to support all your debt payments if the worst happens. Savings and credit ratings could also be under threat, so think long and hard if this type of policy could one day give you a lifeline.
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