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What you need to know
Redundancy insurance was sometimes included in income protection insurance policies.
Most insurers stopped offering redundancy cover during the pandemic.
We could not find any new income protection policies that cover redundancy cover.
Which brands offer redundancy insurance?
Must read: Redundancy cover during COVID-19
Since the coronavirus crisis, insurers have generally stopped offering redundancy cover options for new policies. If you have an existing policy with this type of cover, your insurance should still be honoured; but you may want to double check this directly with your provider.
Although brands no longer offer this cover, we have kept the information on this page in case you have existing cover.
Provider
Redundancy cover conditions and features
Is this option currently available to new policies?
Redundancy insurance is made to provide you with short-term financial support if you unexpectedly lose your job. It will usually pay you up to between $3,000 - $4,000 a month to help you keep up with bills and everyday living expenses while you look for a new job.
In Australia, most insurers only offered redundancy cover as an optional extra with their income protection policies.
Does income protection cover redundancy?
Income protection insurance does not automatically cover you for redundancy. Redundancy insurance is usually an optional extra that is offered by insurers as part of income protection and not all providers who offer income protection have this option.
What does redundancy insurance cover?
Redundancy insurance covers you financially if you are sacked, fired or involuntarily unemployed. You need to hold the policy for about 6 months before you are made redundant. If your claim is successful, it will usually come with the following:
A monthly benefit payment: Your insurer will pay you up to 85% of what you earned at your job. Like a regular income, it's usually paid to you in monthly installments. For example, you might receive 75% of your income or up to $3,000 a month.
A benefit period: All types of insurance come with a benefit period. This is the length of time you will receive payments. For example, if your benefit period is 3 months, you'll receive 3 months worth of payments from your insurer. Often, you can choose how long you want a benefit period to last. However, it's usually capped at 3 months with redundancy cover. In most cases, it ordinarily also comes with an expiry age, e.g. 65 years old.
Keep in mind that like most policies, there will be a no claim period. In a nutshell, you need to have held the policy for a certain period of time before you are eligible to make a claim. With redundancy cover, this is usually around 6 months. This is different from a waiting period. After you are made redundant, you will usually need to serve a 28 or 30 waiting period before you are allowed to make a claim.
When won't I be covered by redundancy insurance?
There's a few sneaky exclusions associated with redundancy insurance. Make sure you're aware of them before you sign up for a policy, otherwise you could be in for a nasty shock.
Typically, you won't be covered if the redundancy occurs:
6 months before your policy starts your employer made you aware of redundancy occurring
Within 6 months of your policy starting
Voluntarily or if you're self employed
Due to illness or injury
If you're living outside of Australia
After a public announcement of reduction in staff numbers through redundancy
Due to the seasonal, casual or temporary nature of your work
Due to unlawful acts
Misconduct or suspensions
You'll also need to work for a set amount of hours per week (usually 20-30 hours), and there is usually a waiting period of about 30 days you'll have to wait out before you're able to claim.
Why you can trust Finder's income protection experts
We're free
You pay the same as buying directly from the insurer. We make money from referral fees when you choose a policy, but you don't pay any extra.
We're experts
Our team of income protection experts have researched and rated dozens of policies as part of our Finder Awards and published 80+ guides.
We're independent
Unlike other comparison sites, we're not owned by an insurer. Our opinions are our own and all guides must meet our editorial standards.
We're here to help
Since 2016, we've helped thousands of Australians find income protection by explaining your cover options, simply and clearly.
Frequently asked questions
Involuntary unemployment cover offers financial support if you lose your job due to no fault of your own. It is also known as redundancy insurance. Examples of no-fault could be a company downsizing or closure.
Typically, income protection policies won't offer back payments that pre-date the waiting period. So, any benefit paid back could be no greater than the length of time that follows the waiting period (in other words, the benefit period).
How long you can stay on income protection depends on the specific terms and conditions of your insurance policy. Pay close attention to the benefit period, which is
the maximum length of time for which the insurer will pay benefits for a single claim. The most common options are 1-, 2- or 5-years, with some policies covering you up to the age of 65.
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, news.com.au, The Telegraph, Explore Travel and Escape. Gary holds a Kaplan Tier 1 General Insurance (General Advice) certification and a Kaplan Tier 1 Generic Knowledge certification which meets the requirements of ASIC Regulatory Guide 146 (RG146).
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