Unemployment Insurance provides short term support by giving you an income while you are looking for a new job following involuntary unemployment or redundancy. The claim duration is typically limited to pay for 12 months although some policies may offer longer benefit periods. The amount of cover maybe used to protect a debt such as a mortgage or loan or other household expense while other policies simply allow you to cover a percentage of earnings.
It is important that you ensure that you don't have cover that overlaps over policies otherwise you maybe paying for cover you don't need as there are normally restrictions on the amount you may protect. Adding cover from other protect plans that pay for the same event those limits depend on the particular policy and can be from 50% to 65% of your gross earned income but some insurers will allow you to insure up to 90% of your net income if the cover is linked to expenses.
You may have more than one policy as long as the cover is not linked to the same expense such as a loan or mortgage.
You should look at the policy terms for each policy and calculate the maximum permitted cover based on income for each and use the lowest figure. This should then give you your personal combined maximum cover amount.
You can opt to include accident and sickness cover or you may have the unemployment cover on its own. Regarding the unemployment aspect the cover will protect you if you are made unemployed as a result of involuntary redundancy. If self employed you may want to consider cover that provides you with financial support if your business stops to trade permanently. To make a claim in those circumstances you need to be signed on as unemployed. The self-employed may have other requirements within the policy terms example; notifying the revenue you have ceased to trade.
Some policies linked to expenses may also offer cover from dismissal but this is not a common feature. More common are legal expenses cover, back to work help services career cover that will allow a claim if you have to give up work to look after a sick relative.
When you first start your policy you may have an initial period where you will not be covered, this is called the initial exclusion. Should you receive any warnings or notices from your employer stating your job is at risk during this period you will not be covered for this claim event even if the actual unemployment happens outside the exclusion period. Not all policies have an initial exclusion if you are taking on a new mortgage, loan or tenancy or a re-mortgage some insurers will waive the initial exclusion or others may reduce the time period. It is therefore a good idea to get quotes that cover living expenses as this may have an impact on the cost and the initial exclusion that will apply to your cover.
The initial exclusion maybe waived if you are switch cover from one provider to another. Switching terms normally apply i.e. no claims, cover has been in force longer than 6 months etc... the full policy terms normally give details on eligibility.
The "Excess Period" may also be called the "Waiting Period" with some insurers is the optional delay period of time you will need to wait before you will receive your first payment if you make a claim. If you have a policy that has a 12 month benefit period the excess does not reduce the benefit period it just adds a delay before payments commence. Choosing a longer excess period may reduce the cost of your unemployment cover.
What are you usually not covered for on unemployment cover?
With most income protection insurance the benefits are are paid tax-free. The only exception to this rule is when the cover is taken out and tax relief is obtained on the premiums this could result in the benefit being taxable. Typical examples being employer or director schemes with premiums paid by the company.