Will My Income Protection Policy Pay Out if I am Made Redundant?

Some income protection policies can provide you cover if you're made redundant.

Income protection provides up to 75% of your regular income if you are unable to work due to sickness or illness.

Will my policy replace my income in the event of redundancy?

This depends on what type of insurer provides the policy.

  • From a general insurer. There are some income protection policies available from general insurance providers that will provide income replacement for involuntary redundancy. It's crucial to be aware of the conditions applied to these policies in order for a benefit to be paid.
  • From a life insurer. Income Protection Insurance from life insurance companies do not offer income replacement if the policyholder is made redundant. However there are other features that can assist redundant workers e.g. waiver of the policyholders premiums if they are involuntarily unemployed for a certain period.

Income protection features that offer assistance if made redundant

As stated previously, there are some policies offered from Australian life insurers that give policyholders assistance under certain events.

FeatureDescription
Unemployment WaiverIf the policy has been in force continuously for a set period preceding involuntary unemployment of a certain number of consecutive working days, premium and policy fee waived for a defined number of months at a time for the period policy holder is involuntarily unemployed and registered with an approved employment agency.
Unemployment BenefitIf the life insured becomes involuntarily unemployed for reasons other than illness or injury, the provider will pay the minimum mortgage repayments while the life insured remains unemployed for a set period of time.

Involuntary redundancy insurance from general insurance brands

As mentioned previously, there are a number of general insurance providers in Australia that offer a benefit payment in the event of involuntary redundancy. While this can be an appealing feature for many, it is important for applicants considering this type of policy to consider the common requirements.

  • Policy must have already been in force for a defined period.
  • Policyholder must prove that their redundancy was in no way related to their own performance.
  • Policyholder must be continuously employed for a defined period prior to lodging a claim.
  • Benefit is only paid after a defined period of time from which policyholder has been made redundant.
  • Policyholder can have no stream of income during this period whatsoever, this may include part-time or casual work.
  • Limit on benefit payment and benefit period. Usually about $3,000 each month for up to three months.

Despite these restrictions, these policies can still provide an adequate level of protection for people with certain financial needs. It is important for anyone considering these types of policies to not base their decision purely on an unemployment feature. Always consider the policy exclusions and the other features available.

Who offers redundancy insurance in Australia?

There are currently not many providers in Australia offering full redundancy cover in Australia though this may change with the arrival of more general insurance providers giving applicants this option.

General insurance providers

As stated previously, there are a number of General Insurance providers with products that will offer cover for redundancy in Australia. Virgin Money has just launched its Income Protection policy that offers an Unemployment Benefit.

Insurance companies

Both Comminsure and OnePath/ANZ feature income protection policies that will provider cover for loans that current customers currently hold with them i.e. mortgages or personal loans.

There are also a number of insurance providers that will offer a premium waiver for involuntary redundancy to ensure you can maintain your policy during unemployment but not be weighed down by payments. This will usually only be offered for a maximum period of time.

Was this content helpful to you? No  Yes

Related Posts

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback

Exciting news!

myNBN.info is now part of the finder.com.au family.

Read more about what this means