How to Insure Against Unemployment

How to Insure Against Unemployment?

With the current downturn in the economy and the job market at an all-time low, millions of workers in the UK are becoming unemployed.

If you are currently working and have been at your job for at least six continuous months, you might want to think about how to insure against unemployment.

These policies are meant to protect you and your family upon sudden loss of income whilst you look for another job. They are considered to be short term policies and there are some important factors you should know before choosing which policy or insurance company to use.

Cooling Off and Waiting Periods

Once you have chosen a policy to guard against unemployment, you should know that there are two very different periods you will hear referred to. The first is a cooling off period in which you have time to quite literally change your mind. According to UK law, you have 14 days from binding the policy to change your mind. If you do not act within those 14 days you will be bound by the policy terms of agreement.

Waiting periods are another matter altogether. A waiting period is the time frame between when you become unemployed and when you can begin to draw benefits. Be careful here because some policies make you wait a full three to six months before you can claim against them. There are a number of reputable companies in the UK that have a 30 day waiting period, which is reasonable. This is what we would highly recommend you look for.

How to Insure Against Unemployment

What Does Unemployment Insurance Cover?

There are actually two main types of unemployment insurance cover to choose from, depending on your needs. You can choose a simple payment protection insurance plan to cover recurring monthly debts such as your mortgage, car loans, credit cards and so forth.

Another type of unemployment insurance is a type of policy that pays cash benefits monthly once the waiting period has been met. The amount you will receive is based on the policy maximum you purchase and quite often this amount is based on a percentage of your wages.

back to top

How Long Will Benefits Last?

Short-term unemployment insurance policies usually pay benefits up to 12 months. Once you have met the waiting period and the benefits commence, the policy will continue to pay monthly benefits as long as you keep premiums current and do not go back to work. It sounds fairly straight forward but this is one area in which many people find themselves in hot water. Make sure you plan for your unemployment insurance premium into your policy or you could be left unable to continue cover!

Choosing the Right Policy for You

Choosing between payment protection insurance and a cash benefits policy is an individual choice. Some people already have payment protection built into their loans so they would be better with a cash benefits policy. Others have some small savings to live on in an emergency and so would also opt for simple payment protection. On the other hand, some workers have no savings and dependents to worry about so cash benefits would be the better choice. Choosing the right type of policy is dependent upon your particular needs.

Better to Be Safe than Sorry

Although there are exclusions to worry about, cooling off periods, waiting periods and variables in benefits, everyone should carry some type of unemployment insurance, especially in today’s jobs market. Literally millions of workers have suddenly lost jobs they thought were secure with a future and were thus unprepared for the financial burdens this placed on their households. If you are in doubt about the future, it is always better to be safe than sorry.

Take the time to compare several policies to find one that best meets your needs. However, one last word of caution is in order. Once you know that you are about to be unemployed, you are no longer eligible for cover. Act now before you get word of possible or impending unemployment.

back to top