Unless your own occupation is one in which you are constantly in high demand, the potential to find yourself without a job in today's ever-changing market is a possibility that should remain in the back of your mind. Although it can be a rather unpleasant scenario to consider, it's important to have coverage for potential unemployment or even for the chance that you find yourself dealing with a long-term illness or are hurt on the job and need disability insurance (even life insurance is something that should be on your mind).

For any of these situations, having some form of income protection is necessary if you are to pay your bills during the waiting period of your new job search. To help you fully understand what options are at your disposal, let's take a closer look at redundancy insurance and what type of protection it can offer you in your own occupation.

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What Is Redundancy Insurance?

Let's imagine that you find yourself out of a job and lack the financial security necessary to keep up with your expenses after you are laid off. In an event such as this, you are going to want to turn to redundancy insurance for your income protection needs. Redundancy insurance is an income protection insurance that provides you with access to funds that you need to pay for bills and your day-to-day life.

Keep in mind that this is an umbrella term, which means that it can cover you during unemployment or provide you with similar disability benefits that you would receive in the face of sickness or conditions that require serious surgery. Eligibility is determined by your specific situation and you will want to make sure that you carefully read the fine print to ensure that you have the coverage you need after you have paid the necessary premiums and invested in your product.

How Does It Work?

Depending on your plan, this form of income protection insurance is designed to protect you when you find yourself made involuntarily redundant. When you purchase a policy, you will generally need to pay your premium for a set amount of time before you will be able to receive the benefits provided by your income protection plan.

It's important to know that this is not typically a long-lasting form of protection either. You will generally receive a monthly benefit for a short window of time, just enough for you to look for a new employment opportunity. You may also need to prove that you are seeking out new employment during your income protection gap period. Take all of these key points into consideration when you are looking for the right policy. Otherwise, you may end up paying premiums for nothing.

The Types of Redundancy Insurance

There are three main types of redundancy insurance you are looking to plan for an income protection gap.

  • Mortgage Payment Protection Insurance, which covers your mortgage payments for a specific period after you have lost your job.
  • Payment Protection Insurance, which generally assists you in paying off mortgages, loans, and other debts. If you are a student going to, for example, the University of Oxford or the Smith School of Enterprise, this would be an insurance policy worth paying the premium for so that you can experience some relief from your University of Oxford or Smith School of Enterprise debts while you seek out new employment opportunities during your income protection gap.
  • Short-Term Protection Insurance, which pays out a proportion of your income for a set amount of time.

As it is with all of these financial products, take time to carefully consider what type of premiums you will be paying and whether not it will be worth it to cover any unforeseen circumstances that would require support for an income protection gap in the future.

If you need help comparing premiums, understanding how much you will be covered for an income protection gap, and seeing what options are at your disposal, compare income protection with iSelect today to get started.