Unemployment is rising dramatically; 165,000 over the three months to the end of August, giving us a total of 1.8 million. “Institutions”, like Woolworths being taken into Administration, with 25,000 jobs at stake, is a wake up call for most of us.

However, before you go running out to purchase a Redundancy Insurance, there are a few things that you should know:

• Redundancy insurance pays out in cases of compulsory redundancy only, if you choose voluntary redundancy, the policy will not pay out.
• Most policies exclude seasonal workers.
• A typical Redundancy Insurance will state that employees must have been employed continuously for six months prior to claim and be a permanent member of staff.
• Redundancy Insurance has an initial exclusion period, the avoid the insurance company being selected against by those that had some knowledge of an impending redundancy, typically 120 days
• In the event of a valid claim, payment start dates vary between 30 to 60 days, however there are Redundancy Insurances that offer “back to day one cover”, which may suit some people. These policies may be a few pence more expensive per month, but could be worth the extra cost for some.
• If you claim on the policy, you must demonstrate that you are actively seeking work. The insurers would expect you to enter into a Job seekers agreement at the job centre, which involves a fortnightly sign on and some state benefits. These benefits are not reduced in any way by the Redundancy Insurance claim payments.

If you already own a Redundancy Insurance that you purchased through a lender, think that you are paying too much per month and would like to switch, make sure that the scheme that insurer that you choose will waive the initial exclusion period, thus offering continuous protection.