What is redundancy insurance?
Redundancy insurance (often known as 'loss of employment' or involuntary employment" cover) provides some form of income replacement if you lose your job unexpectedly e.g. because of automation, overseas outsourcing or involuntary redundancy. Cover can be used to keep up with bills and mortgage payments while you find a new job.
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Which brands offer redundancy insurance in Australia?
|Provider||Standard?||Max percentage of income covered||Max amount of income covered||How long will cover last?||Minimum hours you'll need be working to be eligible|
|AAMI||75%||$4,000||Up to 3 months||20|
|ANZ||50%||$3,000||Up to 3 months||20|
|Insuranceline||85%||$3,000||Up to 3 months||30|
|NIB||85%||$3,000||Up to 3 months||30|
|NRMA||85%||$3,000||Up to 3 months||30|
|Suncorp||75%||$4,000||Up to 3 months||20|
|Virgin||85%||$3,000||Up to 3 months||30|
Conditions for eligibility apply. Always check the Product Disclosure Statement (PDS) to see if you are covered.
How it works
Income protection brands will combine two seperate policies into one product 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
Are you eligible for redundancy cover?
If your income protection policy offers a redundancy policy too, you'll need to meet some conditions. Generally, you must:
- Be unemployed for a waiting period for 30 days from when you are made redundant.
- You must be unemployed at the end of the waiting period.
- You must register with Centrelink or a recruitment agency, actively seeking work.
- The policyholder can have no stream of income during this period whatsoever, this may include part-time or casual work.
Note: This list is not indicative of all policies on the market. Always check the wording of your product disclosure statement (PDS).
Some life insurance brands offer 'relief benefits' for redundancy. This can provide you cover during redundancy if you also have a home loan with the same brand. This benefit usually helps you with the minimum payments on the home loan.
|Policyholder of:||Home loan from:||Monthly involuntary benefit|
Conditions apply, make sure you read the product disclosure statement (PDS) before applying. Information last checked as correct in June 2017 and is subject to change at anytime.
While traditional policies from life insurers will not provide policyholders with a benefit payout if they are to lose their job, their are certain features available on some policies to make this time easier so they do not default on their premium payments. These features include:
- Involuntary Unemployment Waiver of Premium: This feature will ensure that premiums payable on the insureds income protection policy will be waived for a specified period if they are involuntarily unemployed. In order for this to apply, the policyholder will have to show that they are actively seeking a new position. This waiver is usually only available for a certain number of months.
- Unemployment Benefit: A number of policies available from Australia’s major banks will cover the policyholders minimum mortgage repayments and credit card repayments for a set period of time if the policyholders mortgage was taken out with the same financial institution.
- Peace of mind. Redundancy cover ensures that if the worst happens and you lose your job through no fault of your own, you will receive financial support.
- No money worries. Instead of worrying about paying the bills, redundancy cover allows you to put all your efforts into finding a new job.
- Other benefits. You can also enjoy the security offered by income protection insurance, which provides cover if injury or illness prevent you from working.
The not so good
- Confusing. Many people assume that all income protection policies automatically include redundancy cover, but this is not the case.
- Extra cost. Redundancy cover is only offered as an extra-cost option, and only on some policies. You need to be sure that it offers value for money before adding it to your policy.
- Conditions apply. From the details surrounding your redundancy to the time for which you can receive a benefit, there are several conditions you must satisfy in order to qualify for redundancy cover.
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.|
While redundancy cover may seem like an amazing offer on paper - and it can certainly provide very useful cover for some Australians - you should be aware of all of the policy exclusions and conditions before you sign on the dotted line. You’ll need to have a clear understanding of what the claim eligibility requirements are in order to receive the benefit offered, before you can work out whether income protection for redundancy is the right cover option for you.