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Do you need unemployment cover

Last modified: 29 Apr 2013

 

It is worth remembering that in the event of redundancy you’ll probably be entitled to a redundancy payment from your employer. The size of the pay-out you get will of course depend on several factors, including how long you have worked for them, but in many cases it will probably be large enough to last you a few weeks or months at least. This means you need to weigh up the cost of the premiums for unemployment insurance cover and decide whether they are worth paying, obviously taking into consideration your expected redundancy payment and the amount of time you estimate it will take to find new employment.

What are the alternatives?

There are numerous income protection policies that offer benefits aimed at helping you if you are made redundant against your wishes and these can sometimes be more suitable than unemployment cover. For example, some insurers offer a premium waiver with involuntary unemployment, which means you can miss paying your premiums for a specified period of time without losing your cover. Similarly the income protection policy offered by Commonwealth Bank will cover your payments on Commonwealth Bank loans for a maximum of three months. So, if you hold a credit card, a personal loan or a mortgage with the bank they will cover your payments for three months while you find new employment.

These benefits are worth looking for as they can often make an income protection policy a better buy than unemployment cover. It is important to read the terms and conditions carefully though so you don’t miss clauses and restrictions in the fine print.

 

Income protection from a life insurance company or unemployment cover from a general insurance company?

Every income protection policy has its pros and cons, as does every unemployment insurance cover policy. You need to assess the benefits of each and decide which will suit your individual circumstances best.

So for example, if you have been working for a company for around 12 months, have a lot of monthly bills to cover but a good chance of finding alternative employment quickly then an unemployment policy may be more beneficial. If on the other hand you have worked for your employer for 20+ years and you’re going to receive a hefty redundancy pay-out then an income protection policy with benefits such as those mentioned above might be better.

Unemployment insurance cover is available in Australia but before buying it you need to consider how the potential benefits weigh up against the cost of the premiums. Remember that unemployment cover tends to have quite a few conditions that need to be met before a claim can be successfully made. These conditions can restrict you somewhat when it comes to other sources of income and they don’t usually pay out for more than 3 to 6 months maximum.

Saying this, unemployment insurance policies can be life savers in times of need so they are worth considering if you know you can meet the requirements for a claim.



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