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Redundancy Insurance For Income Protection

Apr 16, 2008
Redundancy insurance is protection that covers Brits against the loss of their jobs. The insurance provides income payment or mortgage support in the event of illness, accidents, unemployment, or other triggering events which lead to a loss of earnings. The insurance is often sold in combination with mortgages, credit cards, and other loans.

Consumers need to be prepared to explore options before purchasing the cover. Many major banks and creditors tactfully combine the insurance with their other loan and finance products, in order to put pressure on the customer to buy the cover. Often, major banks and lenders do not mention to customers all the options available for the protection. Consumers should look at insurance brokers or specialists prior to signing documents or agreeing to terms for redundancy insurance.

There are generally three types of redundancy cover. Mortgage protection insurance is coverage designed to help with monthly mortgage payments in the event of redundancy. Loan protection covers debt and basic financial needs. Salary or income protection insurance is intended to provide monthly income protection in the event of a triggering redundancy event. Consumers need to carefully consider their individual needs and consult with an insurance broker to determine which coverage type and coverage amount is best for their situations.

Most redundancy insurance plans have limits as to the amount of coverage allowable. These are usually based on a percentage of the individual's standard monthly income. For instance, one company may offer protection up to 65 per cent of the policy holder's common monthly income for mortgage protection, or 50 per cent for salary or income payment protection.

It is important for customers to also carefully consider the terms and conditions that are the best fit for their needs. Plans are available that allow payments to begin 30 days, 60 days, or 90 days after the covered event. Payments may continue for 12 months to 24 months depending on the coverage. Some customers may prefer to have payments begin sooner, if necessary, while others may rather have payments start a bit later and continue longer after the event.

An added bonus with the redundancy cover is that its benefits are tax-free. This means that the payments are not construed as income, rather as insurance payments, which are not taxed. Consumers are much better off looking to specialists who are advocates for their customers. Banks and lenders are often priced 40 to 80 per cent higher than stand alone providers. They are also notorious for attempting to sell the products to customers that would not be eligible to receive payouts, such as retirees or part time employees.

Redundancy insurance provides great peace of mind to Brits who rely on month-to-month income to pay their bills or provide for family needs. As with any service oriented product, it is important that prospects consider the services and reputation of the providers they look to. The State should not be relied on to provide for monthly needs in the event of job loss. Individuals need to protect themselves and their families by getting protection.
About the Author
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of redundancy insurance.
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