Can I take out unemployment insurance cover in Australia?
You can get cover for involuntary unemployment if your policy is from a general insurer. There are a number of policies offered by general insurance companies in Australia that will provide a payout for a defined number of months for a maximum amount.
But I thought income protection protects my income?
There is a common misconception among many Australian’s that they will receive a benefit payment from their Income Protection Insurance if they are made involuntarily redundant. In comparison to protection plans in the United States and United Kingdom, Income Protection plans from life insurance companies will not provide a payment if the insured loses their job.
What if my policy is from a life insurer?
In addition to these general insurance policies, there are number of features available on policies from life insurance companies that while not providing a benefit payment, will provide other support to the policyholder during this period or an additional option that pays an on going benefit.
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Involuntary unemployment cover from general insurance providers
The growth in the number of people looking for protection in the event that they are made unemployed has given rise to a number of general insurance companies offering an unemployment cover option. Redundancy cover usually provides an ongoing contribution of 75% of the policyholders regular income, usually up to three months.
What are some conditions around cover?
Applicants must be aware of the restrictions of this feature and the criteria for them to receive a payout. Most of these policies will require;
- The policyholder to prove that their loss of job was in no way related to their performance but a result of the businesses financial strength.
- In order to receive the benefit, the policyholder must not be receiving any other form of income whatsoever. This includes payment from a casual or part-time position.
- The employee to have been employed continuously for a specified period (usually around 6 months).
- Employee will only receive a benefit payment after a number of weeks, from being employed.
- Payment not provided to people finishing seasonal or contract work.
- The employee must provide evidence that they are genuinely looking for new employment.
What does this mean for the policyholder?
- They are dependent on their savings for the period between redundancy and when the benefit will be paid.
- They are unable to start looking for part-time work to get by as they look for a full-time position.
- Can be extremely difficult to show that their loss of job was not related to their performance whatsoever. This is especially the case if they were let go at a time when only a portion of the company lost their position.
- Workers employed on a contract basis are not able to take out cover.
Taking each of these points into consideration, the applicant must really consider their own position. While the benefit payment might provide some support for a short period of time, most workers will still be entitled to some form of redundancy benefit from their company. Policyholders must weigh up the restrictions of the policy and what they will be paying in premium payments to assess whether they really stand to gain much in the long run.
Income protection insurance and unemployment cover from life insurers
While it is illegal for life insurance providers to offer applicants benefits for redundancy, there are policies that will give certain support to customers that become involuntarily unemployed.
Unemployment cover benefit
Commonwealth Banks Income Protection Policy Income Care will provide a benefit to cover the minimum monthly loan repayments held with commonwealth bank for a maximum period of three months. This means that if the policyholder has a mortgage or credit card debt held with Commonwealth Bank, they will cover the minimum monthly repayments on that debt for a 3 month period.
Unemployment waiver of premium
This feature means that the policyholders premium payments will be waived if they made involuntarily unemployed. This waiver will only be available for a certain number of months and they will usually have to show evidence that they are actively seeking a new line of employment.