Redundancy insurance is an add-on that you can get on some income protection policies, that offer a extra benefit if you're made involuntarily redundant. The reason it exists is because income protection policies typically don't cover unemployment of any type. They only cover loss of income due to illness or injury for the most part.
There are some other quirks about redundancy insurance though, including these:
No, Australia doesn't have what other countries refer to as unemployment insurance. These schemes are typically run by the government, where premiums are collected from companies or paychecks to pay for unemployment benefits. It can get messy - some schemes require you to be in the workforce for a minimum amount to time, or to have contributed a minimum amount via premiums to be eligible, which can leave people without benefits when they're left without a job.
Instead, Australia funds it social security through income taxes, which makes them much more flexible to individuals. They're far from perfect, everyone seems to agree on that! But compared to other countries, the Aussie system is a lot easier to navigate.
If you're made redundant and you don't have an income policy that will pay out, what happens will depend on your circumstances.
Notice period: If you're employed on a permanent contract (ie not casual) you should be paid for your notice period. There are minimum notice periods set by the National Employment Standards - the exact period depends on your age and how long you've been at the company. They range from 1 week to 4 weeks.
Redundancy pay: If you've been with a company for at least a year, then you should be eligible for redundancy pay. This ranges from 4 weeks to 16 weeks, again depending on your term of service. There are some weird exceptions to this, including if you're employed by a small business, so don't bank on this because smooth sailing.
Pausing your premiums: The one favour you might be able to get from your income protection insurance company is a pause in your premiums. Once you've found out about your redundancy, give your insurer a call. Even if they don't cover your unemployment, they should offer you the chance to pause your premiums or suspend your cover if you can't afford them while you're unemployed. Just be sure to resume your cover once you've found a new gig.
You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees.
You save time. We spend 100s of hours researching income protection insurance so you can sort the gold from the junk faster.
You can trust us. We say it like it is. We aren't owned by an insurer and our opinions are our own.
Find the latest income tax rates set by the ATO
Find out why income protection is an important tool to combine with your entitled sick leave.
Income protection will pay out for a certain period of time known as the benefit period. This can vary based on a number of factors.
Yes, Medibank does income protection too. You can get up to $12,500 a month.
Although income protection and personal accident cover both provide you with income replacement, there are key differences. Read on and compare.
One of the benefits of income protection insurance is that you may have the ability to claim a tax deduction on your premium benefits. Find out if the same rules apply for policies inside super.
Find out why you should be thinking about income protection insurance if you're a keen sports player.
Income Protection has specific features designed for dentists including needlestick cover.
Find out what an AIA income protection insurance policy covers and receive a secure quote for cover. AIA income protection can cover up to 75% of your income following serious injury or illness.
Looking for the best income protection insurance but not exactly sure where to start? Compare the Finder Awards 2023 insurance winners.