Many mistakenly believe that by getting income protection insurance, they’re automatically covered for involuntary redundancy (i.e. getting laid off, through no fault of their own). But unfortunately, it’s not that simple. Income protection is designed to provide you with up to 70% of your wage for a set period of time in the event you are ill or injured – not if you find yourself unexpectedly unemployed.
However, there are products out there that do cater to this demand.
N.B. Comparethemarket.com.au may not provide redundancy cover products through either our website or our partners.
Here are some of the requirements for a successful application for redundancy insurance:
It can cover people working on a “contract” basis (and will usually be paid to those people where the contract is cut short by no choice of their own).
Redundancy cover isn’t technically ‘insuring a life’, so life insurers can’t underwrite it themselves. Instead, it’s sometimes listed as a feature under some policies, but it’s actually underwritten by a general insurer. This just means it may be a feature you can choose to include in your policy, at additional expense.
You’ll find that some banks offer some redundancy cover to customers with both a mortgage and an income protection policy. With these products, the benefits paid tend to go straight to paying off the mortgage.
Chiefly, redundancy cover offers personal security during a difficult time. There are also several specific benefits you should look out for when securing the cover in the first place.
Additionally, be on the lookout for these restrictions.
You may not be able to claim if…
There are plenty of other reasons why you may not be covered, and you will be able to find those listed in your product disclosure statement.
Conventional wisdom says you should always have three months wage saved up and locked away – ready in case you’re shown the door at your workplace. Whether or not this product is suitable for you is a decision only you can make. We will say that investing in further education for yourself is just as smart a move as planning for a redundancy that may never occur.
One thing that’s certainly worth protection is your ability to earn income. If you cannot work due to illness or injury, it can have a huge impact on your household for a long time. Luckily, income protection can help ease this burden for a time. Learn more about the types of income protection, or start comparing policies now.
The information provided here is general only and does not consider your personal objectives, financial situation or needs. Before you decide to purchase a product, it is important to read the relevant PDS.