Cover if you lose your job
Worrying about losing your job can be just as stressful as
actually being made redundant. If you're not sure how you would pay
the bills if you were laid off, you might consider taking out
redundancy insurance. Here we explain what is and isn't covered in
these policies, so you can work out whether it's right for you.
What is redundancy insurance?
Redundancy insurance can provide short-term financial assistance
if you lose your job. This is not cover for when you choose to
leave your job. Some insurers offer it as optional cover on income
To be eligible for redundancy insurance, you need to meet the
insurer's definition of 'involuntary unemployment' which can mean
for example, if you are:
- An employee - You have been 'let go' from a
job that has been paying you a salary, wage or commission.
- Self-employed - Your business has stopped
trading because you haven't been able to meet the business'
- On a fixed term contract (e.g. 12 months or
more) - The contract stopped before a date you previously agreed
on, and not by your own choice.
Choosing a redundancy
If you are considering whether to take out redundancy insurance,
here are some things to think about:
Likelihood of redundancy
How likely is it that you could lose your job? How quickly could
you find another job, and how would you pay the bills while you
were looking for work?
Many policies will not allow you to claim for a certain period
(usually 3-6 months) from the date you take out cover. So, if you
were made redundant soon after signing up, you may not receive any
benefits at all if you find work again before the no-claim period
Some policies will not pay you until you have been out of work
for a certain length of time, usually 30-90 days. This means you
would need to find another way to pay your bills during this
Benefit payments are usually a proportion of your current
monthly income, for example 75%. Check the maximum amount the
insurer would pay you each month. Will this be enough for you and
Insurers usually only pay benefits for a maximum amount of time,
like 3 months. If you're out of work for longer than this, you
would need to find money elsewhere to pay your bills.
Most policies expire when you reach a certain age, such as
If you are made redundant, you may be entitled to redundancy
pay. Depending on your circumstances, this might reduce the need
for separate insurance. Visit the Fair Work Ombudsman's website for
information on redundancy pay and
What's not covered?
Before you buy a policy, check the product disclosure statement (PDS) to
find out what exclusions apply.
Some situations that redundancy benefits will usually not cover
you for include:
- Pregnancy, miscarriage or childbirth
- Voluntary resignation, retirement or abandonment of your
- The ending of a fixed-term contract after your agreed
- Seasonal employment
- Unemployment because of sickness or injury.
If you lose your job, redundancy cover can tide
you over until you find a new one, but think carefully about
whether it is right for you.
Last updated: 30 Nov 2016