Redundancy Insurance: A Guide

Redundancy insurance is useful for any employee. After all, you never know when the business needs of the company might change, or when the company might start to fail. Since employees have financial commitments to meet, then redundancy insurance might be the answer. This type of insurance has many names and may be wrapped up in other kinds of insurance. For example, it may be called unemployment insurance, salary insurance or even mortgage protection insurance. Other names are payment protection or income protection and accident, sickness and unemployment insurance. Whatever it is called, the purpose is to make sure that employees can meet their financial commitments if they no longer have a job.

Of course, employees who are made redundant may be able to meet some of their commitments, but that only applies if they qualify for statutory redundancy pay. If an employee has been continuously employed by the same employer for two years or more (including those on a fixed term contract), then that employee should receive redundancy pay. How much the employee receives will depend on the employee's age and length of service. However, employees who are offered suitable alternative work will not qualify for redundancy pay.

What Redundancy Insurance Covers

What a redundancy insurance policy covers depends on the type of policy it is. For example, the payment protection insurance policies offered when you buy something on hire purchase or take out a store card often only cover you for purchases made with that card. It's far more cost effective to take out a standalone policy which will cover all your payments. If your insurance policy is a mortgage payment protection insurance policy, then it will cover the payments on your mortgage for a set time. A salary protection policy will usually insure a portion of your monthly income, hopefully giving you enough to make the most essential payments.

Many of these insurance policies will only pay out for a year or two, but it may still be useful to have them. Employees who have been employed for less than two years have very little legal protection. Getting this kind of protection will make sure that employees don't have to panic if employers make them redundant. Even for long term employees, it makes sense to have some sort of protection, as you can't be sure when you will get another job. It's worth taking some advice on redundancy insurance.

Deminos are HR Outsourcing and employment law specialists. To find out more please call us on 020 7870 1090 or visit http://www.deminos.co.uk