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Consider Unemployment Insurance to Stop Financial Difficulties Arising

Sep 12, 2008
Unemployment insurance can stop a great deal of financial difficulties from arising if you should find yourself a victim of redundancy. If you stop to consider how you would pay your mortgage each month, loan payments or indeed your essential monthly outgoings such as heating, lighting and food bills, taking out insurance makes a lot of sense.

To cover your income you would need to consider unemployment insurance called income payment protection. You insure a set amount of your own income and if you need to claim this is what you get back as a tax-free payment. With this money you are able to continue paying all of your essential outgoings which of course could include your mortgage, loans and any other bills that keep the home running each month.

If you just need to cover your mortgage repayments each month then consider taking out a mortgage payment protection policy as unemployment insurance. This is a very valuable policy as it can mean the difference between losing your home to repossession by the lender and keeping it. Because you are just insuring your mortgage payment a policy might not cost as much as if you were insuring the whole of your income.

Loan payment can be kept abreast of with loan payment protection. You would insure up to a certain amount of the payments of your loans or credit cards if you borrow on these. This means that you do not falter on the loan and so your credit rating remains intact. It also means you are not at risk of the lender taking you to court.

Unemployment protection would provide you with your income once you had reached the timeframe set out in the policies terms and conditions. Providers will generally state a deferment period of between 30/90 days. Some will offer to backdate to day one of you being unemployed or incapacitated so you have to check the terms for this too. You would then receive a payment each month for either 12 monthly payments or 24 monthly payments and then the cover would stop paying out. During this time you would have peace of mind which allows you to concentrate on finding work.

As no one can say that their job is safe considering unemployment insurance is essential. Of course you could think that you would be able to claim benefit from the State to help you get by. While you may be entitled to receive help the help may not be enough. In the case of mortgage payments you would only get help with the interest part of the mortgage payment and then up to a certain amount. You would also have to wait many months before you would see any money. You would have to think twice about relying on savings because it could be many months before you found suitable work and savings might not last that long. If you take out a policy with an independent provider you will get the cheapest premiums and make huge savings when compared with high street lenders.
About the Author
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of unemployment insurance.
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