Unemployment Insurance Explained

Article published on 11th July 2014

Most unemployment insurance providers now offer cover that can pay out for a maximum of 12 months or until a client returns to work. Previously policies were more readily available that could pay out for up to 2 years and whilst this longer term is still available it is no longer the standard option.

The majority of insurance companies consider Unemployment Cover high risk due to the recent recession and general job instability faced within the UK market. Clients looking for Unemployment Only Cover may find that considering the addition of Accident & Sickness Cover provides a much more comprehensive policy for only a marginal price increase and with some insurance companies it is even cheaper. GI Secure is an example of a provider where it is often cheaper to look at full Accident, Sickness & Unemployment than standalone Unemployment Cover.

legal and general logo

Legal & General are a provider that work a little differently to this and for the majority of clients looking for Unemployment Only Cover, I find the premiums with this provider to be the most affordable on the market. The biggest influencing factor on the price of the Legal & General policy is a clients postcode and it is possible that having a mortgage in place could affect the premiums offered.

Other aspects of the policies can differ significantly. There is the initial exclusion period (sometimes referred to as a qualifying period). This represents the number of days that you need to have had the policy running before the insurer would consider a claim. If there is any risk to your job during this initial period then they would not look to pay a claim. So if you are notified of potential redundancies within the qualifying period your policy essentially becomes void and you should cancel it. The exclusion periods typically range between 60 to 120 days. Two companies that offer a short exclusion period of 60 days are Legal & General and Keystone. Liverpool Victoria (LV) offer a 90 day exclusion period.

liverpool victoria logo

LV offer the most comprehensive Unemployment policy on the market; in all cases it must include Accident & Sickness benefit. Before the policy is accepted there is a telephone interview (medical underwriting procedure) and it is important to note that if you have existing medical conditions then the LV policy may not be appropriate. At the point of a claim LV will look at the initial exclusion period slightly different to other providers. If say your job was made at risk (during the qualifying period) but your employer does not say that they are going to made you redundant until after the initial 90 day exclusion period has passed, then they will consider a claim. All other providers would not look to pay a claim as there was risk to your job during the exclusion period.

It is important to consider the waiting period before a claim on these policies. Normally you would have to be redundant for 30 days before insurers will consider paying anything out; based upon a 30 day standard policy with claims paid from day 61. Clients who do not have much savings or who do not wish to use savings in the event of unemployment may wish to have a 'back to day 1'. This is the option that can look to pay out soonest if you are in a position where you need to claim and it means on day 31 the insurer would look to get the first monthly payment to you. The downside of a policy which is back dated to day one is that they are typically more expensive than policies which start paying out later. Other options are available where you can have a policy that can pay on the 61st, 91st and 121st day of unemployment.

Levels of savings and redundancy packages are important factors to consider when deciding how soon you need a policy to start paying out. Typically unemployment policies pay in addition to redundancy packages however insurers tend not to pay out in addition to 'payment in lieu of notice' so you cannot claim for the number of days that you are technically employed by your company. As there are so many different options available, and stipulations for acceptance of claims, it is worthwhile speaking with a trained insurance advisor who can explain the choices that are available to you.

Please feel free to call us on 0808 17 82 777 to speak with one of our insurance advisors about Unemployment Cover.

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