Unemployment Cover : What This Covers

Unemployment cover can be purchased separately to life insurance but tends to be rather expensive and many product providers have complicated claims criteria and procedures.

You elect at the beginning of the policy some simple criteria;

  • how long the protection in place (same as the life cover term or less if more appropriate)
  • how long it pays for; 1 year or 2 years
  • how quickly it starts; 1 month or 3 months
  • how much monthly cover you require being paid out

A “Simplicity is Divinity” approach to customer service, in what will be a difficult and unnerving situation, some UK insurers have made the cover and the claims procedure simple and transparent.

Unemployment Cover : Who Needs This The Most

In the 1970’s, 1980’s and most of the last 3 decades unemployment was an affliction more associated with industries going through computerised change and those affected by global market conditions and the ability of eastern nations to provide cheaper manufacturing. Unemployment protection had not really been available to the mass market as a protection product and where it was the restrictions outweighed the benefits.

A new global crisis; our global economy has been through the most dramatic change ever, affecting how banks lend, and placing huge pressure on business small and large. So, who needs unemployment cover the most – unfortunately we all do for the foreseeable future; Some insurers have made the product simple and compared to other luxury items we enjoy for as little as just over £1 a day this should be the most important purchase of them all.

Unemployment Cover : In Depth

The developing economic situation has caused turmoil in the job market. Protecting yourself against unemployment is more important now than ever before. Take a lesson from those you see losing their jobs around you, and insulate yourself against such a situation before it is too late. Unemployment cover enables you to keep paying your bills and surviving during rough spots.

Chances are you probably don't have enough money in savings to survive should the worst happen. That's why unemployment insurance is a must have for many people, given the constantly changing situation. Unemployment cover is easy to understand. All you do is pay a little bit every month and should you become unemployed you get paid a lump sum every month for a set time period.

Getting into accidents, falling ill or experiencing an employment problem is troublesome for anyone. Unemployment insurance is there to protect you and cover your lost income or your mortgage when you cannot work because of an accident, illness or unemployment. This insurance enables you to remain close to your standard of living when your income dips from employment problems.

There are approximately 2,000,000 people in the UK who have been away from their employment for more than 6 months. Most of these people have been away because of illness or accident, a unemployment policy can help you a lot in these situations.

The Importance of Unemployment Cover

If you unexpectedly lose your income like many people do, you can be left with a pile of bills and no way to manage it. In these cases unemployment insurance is a valuable safety net. Are you prepared to see your savings and lifetime of work diminish as you tap into it to pay for your bills? That is why unemployment cover is so important. Even more so if you are self-employed, you need that protection in place lest you lose your valuable income.

There are 200 unemployment claims each and every day in the UK. Are you prepared to stick it out on your own for months on end , should you be forced into unemployment? No one wants to see their home and savings taken from them because they cannot keep up with the bills. However that could happen if you are not prepared to deal with the situation if you become unemployed.

What Does Unemployment Cover Include?

This type of insurance is ASU which stands for accidents, sickness and unemployment. This enables you to protect yourself against a wide range of employment problems with a single package. These policies are tax free and provide you with a monthly income if you cannot work because of ASU.

This policy provides you with an income based on your current salary. All of this calculated prior to deducting tax or other obligatory tariffs. It will give you a predetermined amount of money each month as long as you qualify or return to work, up to the maximum number of monthly payments available, according to your policy. You should read your policy to discover how many months your ASU policy will pay you in the event you become unemployed.

How Much Will My Unemployment Cover Cost?

Your plans price will be calculated using several important elements:

  • Your age
  • Your choice of coverage
  • The number of months you will be paid out for

Policies can be confusing and complex if you are not familiar with them. You should take the time to fully understand the policy you are buying and ensure you will be satisfied with it. An insurance policy may seem like it offers a fantastic deal until you full understand its implications. Also you should investigate into which insurance companies accept your occupation as not all jobs are accepted at insurance companies. There are a lot of policies available and all of them seem to have their advantages. In these situations how do you choose the right one for you?

Picking the Right Unemployment Cover For You

This cover is made to enable you to keep paying back on your debts and helps you to avoid going further into debt in the event that you become unemployed. These policies cover your personal credit such as your mortgage, rent, loans, and credit cards. Are You Eligible For Unemployment Cover?

In order to be accepted for unemployment cover you need to meet the following requirements:

  • You are a permanent resident of the UK
  • You are between the ages of 18 and 65 years old
  • You work at least 16 hours per week or are self employed
  • You must be able to register at the Jobcenter office in the event you are unemployed
  • You must meet the criteria for the Incapacity benefit if you should become incapacitated
  • You must be listed on your mortgage as the borrower if you wish to insure your mortgage payments

When Policies Start

You should be aware that in the event of unemployment you will have a waiting period before you will start to be paid out. When your claim has been processed and accepted by your insurer, the number of months they will pay you out will depend on your policy. A normal policy will cover you for 12 months, but it is possible to buy policies covering up to 24 months.

Terms You Need To Know For Your Unemployment Cover

There are several terms used in unemployment covers that you need to understand so you can get the best deal possible.

Initial Exclusion Period - This is the length of time you must wait after signing up for a policy before you are protected by it. For example you cannot get an unemployment cover, and then become unemployed 2 weeks later and get payments. This is made so that people who know they will be fired cannot take sign up for insurance just before they are terminated.

Deferred Period - This is how long you need to wait to get payments after you process a valid claim with your insurer. For example if you become unemployed and apply your valid claim, your policy may require that you wait for three months before being eligible for your first unemployment benefit. You want to get as small of a deferral period as you can.

Benefit Period - How long your benefits will be paid to you for, generally it is 12, 18, or 24 months.
Why Social Security Is Not Enough

A lot of people are relying on the government to get them out of a pinch should they be unemployed. They think that social security is the answer to their problems. However most people don't realize how bleak their situation will be should they have to rely solely on social assistance.

  • You will have to continue paying your mortgage for at least 9 months while you are unemployed
  • You will not be covered for any part of your mortgage that goes over a hundred thousand pounds
  • You will get nothing at all should your partner be employed full time
  • You will experience difficulties getting social assistance if you have more than eight thousand pounds in your savings account

Perhaps worst of all is that should you make more than 87 pounds per week you will only receive 72.55 per week in support. How do you expect to live off such a small amount of money? The Post Office reports that the average family requires a minimum of 300 pounds per week in order to live. Do you see the big problem with social security now?

Types Of Unemployment Cover Available

There are several different options when looking at unemployment cover:

  • Stand alone policy
  • Payment protection package
  • Income protection package
  • Mortgage payment protection insurance

Each of these options is different and its important you understand their implications so you can choose the right option for you.

A Stand Alone Policy - Stand alone policies enable you to get the cover you want without paying for anything extra. If you are only looking for a solution to unemployment then this is a valuable asset that pays dividends. It enables you to get the protection you want at a low cost.

Payment Protection Package - A payment protection policy has unemployment cover bundled along with protection against sickness and accidents. This covers your mortgage and your loan repayments. Typically you can start getting pay outs on your policy just 1 month after filing your claim. The purpose of this is to protect you for short term spurts where you are unemployed. You will often need to have been employed for 6 months or 1 year in order to receive benefits. You should take care that your policy typically won't be active for the first 3 months you pay into your cover. Before signing up for the cover ensure that you would be eligible for pay outs in the event you would be unemployed. You need to take caution that these types of plans are famous for having back doors that enable the insurer to get out of paying you. You need to look for all the exclusions and exceptions in your contract before signing.

Income Protection Package - Income protection is where you are unable to work for a specific length of time due to illness, or accident. You may sign up for an income protection package and then add an unemployment cover to it. This offers the most cover compared to the other two options available. Income protection packages are the most flexible and comprehensive for loss of income. You are eligible for benefits under many more circumstances.

Mortgage Payment Protection - This is a similar policy to income protection except that it is primarily designed to protect paying your mortgage. It is similar to unemployment insurance in that it allows you to insulate against failing your mortgage payments because of accidents or falling sick. Whether your take mortgage protection or income protection really comes down to what your concerns are. If your real financial issue is being able to keep paying your mortgage in the event of a job loss rather than lost income, you may want to consider this plan. You could also get unemployment protection and a mortgage payment protection plan.

A word of advice, dont get insurance from the place you got your mortgage without first shopping around. You may pay well over the market rate for insurance by not looking outside of the firm that gave you your mortgage. Typically with mortgage protection insurance it covers 125% of your mortgage repayments along with coverage of 75% of your income.

Coverage For Self Employed - If you are self employed it is best if you set yourself up as a employee of your company in order to activate unemployment protection. There are very few governmental and agency based protections for self employed professionals. That is what makes it even more important that you take out insurance. Once you are set up as an employee at your company you need to show consistent employment for at least 6 months. Check when your insurance will take effect and sign up for the insurance ahead of time.

For example if it takes 2 months of paying premiums before your insurance takes effect and you need to be employed for 6 months to make a claim - you should get cover at 4 months, pay for it for 2 months and then your completely eligible for unemployment cover by the time you've been working as an employee for 6 months.

Common Unemployment Cover Claim Exclusions

Before deciding to get unemployment cover you should be aware that there are exclusions to the policy. These are the most common reasons why people cannot get compensation from this cover:

  • Remember that you usually need to be employed for at least 6 months prior to being terminated
  • Your employment often needs to have ended at a fixed term
  • You cannot get benefits if you are dismissed for poor behaviour
  • You must be a UK resident and have resident status
  • Your policy will take anywhere from 30 to 120 days of paying into it before its protection takes effect

Watch out if you dont pay into your national insurance contributions, check your policy for its implications.

You should also keep a sharp eye to how your payments will be calculated, for instance in mortgage payments, do they calculate out your monthly payments based on a fluctuating interest rate or on a set one? This could have big implications if interest rates rise. If you are to be taking out more than one insurance policy for protection, then check with your providers about how your different plans will overlap and the total amount that will be paid out to you.


Unemployment cover enables you to protect your income, credit, home and savings by insulating yourself against temporary unemployment. Being unprepared for such a situation can wreak havok upon your credit and savings. Not to mention the incredible stress you could experience from watching bills pile up month after month.

Find out which cover plan works for you and then compare different providers to find the best price with the policy you want. Read all the fine print and most of all make sure you understand the policy fully before agreeing to it. Your understanding of the policy will ultimately allow you to pick the best choice that will work in your favour.

Content by Robert Prime