What is Unemployment Insurance?

Find out more about Unemployment Insurance, to see how you could insure your income against the unexpected job loss or redundancy

Unemployment Insurance is a type of income protection that covers you if you lose your job involuntarily.

Sometimes referred to as Redundancy Insurance, it is designed to provide short-term financial security in the event that your regular income stops unexpectedly.

Unemployment Insurance and Short-Term Income Protection

Unemployment Insurance is known as Short-Term Income Protection, because the monthly benefits are paid for a limited period of time. When you make a claim an Unemployment Insurance policy, you will receive up to 12 monthly benefit payments in any one claim period.

Acting as your own personal safety net, the money you receive is designed to cover a proportion of your wages or salary, but not all of it. The idea is that you are still able support yourself and your family while you look for another job most suited to your skill set, and do not feel pressured into accepting the first opportunity available.

Once you make a claim, the monthly benefit will be paid directly to you, and you are free to use the money however you choose. The amount does not have to be linked to a loan, mortgage or any other financial commitment.

The payments you receive are tax free, and are based on a percentage of your gross monthly income. Typically, these payments will cover up to 65% of your monthly income.

It’s important to note that you do not have to opt for the maximum benefit amount available. You should choose an amount that is both affordable and that will be enough to help you meet all essential financial commitments.

When impacted by redundancy, most people naturally reduce their outgoings, and find that they are able to survive on an amount that is much less than they usually would.

Some people may not be sure whether they need Unemployment Insurance, particularly if they have been in the same steady job for a number of years, or if they are self-employed and are earning a satisfactory regular wage.

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Is Unemployment Insurance mandatory?

Of course, in an ideal world, income protection wouldn’t be necessary, but in our ever-changing political and economic climate, it’s impossible to predict what’s around the corner.

If you suddenly lost your job through no fault of your own and your income stopped unexpectedly, would you still be able to meet your financial commitments? Without a regular salary, most people would struggle to cover even the most basic outgoings such as paying the bills, rent or mortgage repayments and putting food on the table.

It’s often said that many people are only one pay cheque away from homelessness, and although this might sound like a bit of a bleak statement, it’s not unfounded.

Research shows that a quarter of UK residents have less than £95 in savings, and that 41% of people will be made redundant during their working lifetime.

Whether you are just supporting yourself, or are providing for an entire family, unemployment offers peace of mind, giving you security and reassurance at times when you need it most.

When you protect your income with Unemployment Insurance, you will no longer have to worry about what might happen if you were made involuntarily redundant.

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Unemployment Insurance eligibility

To be eligible for Unemployment Insurance, you must be aged between 18 and 64, and a permanent resident of the UK, Channel Islands or Isle of Man.

As long as you are in full-time employment (more than 16 hours a week) and have been working for the same employer for at least 6 consecutive months, you can purchase an Unemployment Insurance policy.

If you’re thinking about purchasing a policy, or need more information about Unemployment Insurance, speaking to an advisor is strongly recommended. Our income protection specialists will help find the right cover for you, at the right price.

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