The expected rise in redundancies has made insurers consider the withdrawal of unemployment insurance policies from their portfolios. A policyholder, who is made redundant, will receive an income from unemployment insurance cover. Hopefully this will be sufficient to support the policyholder until they have found another job. Unemployment insurance is different from payment protection insurance, as the latter simply pays the premiums on a specific credit card or loan debt.
Unemployment cover has been withdrawn by Norwich Union, one of the largest insurers in the country and there are fears that others will follow suit. Emma Walker, who is head of protection at Moneysupermarket.com, the price comparison site, says that other companies may follow the lead of Norwich Union and withdraw from the market. A few smaller providers like Pinnacle Insurance and Hitachi Capital have already done so. The message is clear.....act now if you want to sign up for unemployment insurance.
Insurers have looked at the deepening economic downturn and have decided to pull out of unemployment insurance. Several major public figures like the Chancellor, Alistair Darling, the Prime Minister, Gordon Brown and the Governor of the Bank of England, Mervyn King, have all warned that a recession in the UK is fast approaching.
Never in the past 17 years have jobs been lost at a faster rate. In barely three months, between June and August, the number of unemployed jumped by 164,000 to a new high of 1.79 million. Unemployment insurance policies will help to support many of these people.
Mrs Walker reassured people that no active unemployment insurance policy would be cancelled, even though it may say otherwise in the small print of the policy. Providers are allowed to cancel policies if they wish, but she was unaware of any company planning to do so.
So is unemployment cover worth taking out? The short answer is no, not in all cases, and, if you decide to proceed, it pays to be very careful about what you sign up for. If you fear for your job, however, you should certainly consider some form of insurance to meet your liabilities should the worst happen.
Even the better policies come with exclusions, including limits on how much of your income and debts are covered and you can expect a considerable wait between taking the policy out and making a claim.
As more people get made redundant, and because the monthly premiums can be relatively low, the policies are worth considering but only as part of a review of all your finances. For example, the policy is going to offer a much better safety net if you can boost your savings to make up for any shortfall in the policy payout.
Rather than buying at the point of sale, it is worth looking at the small print and comparing it with standalone policies offered by independents. Companies such as British Insurance, Paymentcare, the Post Office all provide policies that might suit your needs better.
You will also need to wait a number of months after you have bought the policy before you can make a claim. This is done to stop people, who know they are about to lose their job, insuring themselves. The waiting time is typically between three and four months from the date the policy starts. Once you make a claim, there will also be an 'excess period' of around 30 days before the policy starts paying out.
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