Some income protection policies can provide you cover if you loose your job
Income protection provides up to 75% of your regular income if you are unable to work due to sickness or illness. However, in cases of redundancy, cover is treated differently.
Income protection policies that cover involuntary redundancy
When will a policy replace income in the event of a 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 may offer income replacement if the policyholder is made redundant. This is usuallly an optional features on some policies and only covers you for a limited amount of time (e.g. 3 months). 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.
So how can I get redundancy cover?
Some life insurance brands will cover two seperate products in one policy e.g.
- Income protection from a life insurer
- Redundancy insurance from a general insurer
An example of a life insurance brand is ANZ Life Insurance who combines Income Protection from OnePath Life Limited and Involuntary Unemployment from OnePath General Insurance
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.
|Redundancy Option||If the policyholder is made redundant and has a redundancy option, then the policyholder may receive income protection for up to 3 months.|
|Unemployment Waiver||If 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 Benefit||If 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.
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.
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.