If you are feeling a little twitchy about the potential for becoming “gainfully unemployed”, and are considering protecting your future, by taking out Redundancy Insurance; do shop around. Have a good look at the contracts that are on offer from the independent sources. Price; yes this is important, but there is a balance to consider. A cheap policy that does not pay a claim, due to the small print, is a total waste of money, however an expensive policy that does not pay out because of the small print, is a disaster.

There is no excuse for either of the above, the competition commission has told you that you should not buy at the point of sale and the internet allows us to compare products with ease.

Redundancy Insurance is a contract and as such there will be terms and conditions attached.

Here are a few of the more important one to watch out for:

Eligibility: Do your employment circumstances fit the eligibility criteria?

Care should be taken here, generally you need to have been in employment for six months continuously, working more than 16 hours per week, actually working i.e. not drawing sick pay, aged between 18 and 65, be resident and working in the UK, Channel Island or the Isle of Man. Seasonal, temporary or contract workers are generally excluded.

Failure of any probationary periods is not covered.

Initial Exclusion period: Important to watch out for this one – most Redundancy Insurance have this as a built in condition to avoid being selected against i.e. policies being taken our when there could have been some knowledge of impeding redundancy. Normally, these exclusion periods are around 90 days.

Deferred Period: Following acceptance of a valid claim, benefits are payable monthly after a 1, 2 or 3 months period. A policy that pays out after three months has elapsed is less expensive and can be useful if a rainy day fund is available or some degree of redundancy money has been paid out. There is “back to day one” cover is available with some Redundancy Insurance; this will pay benefits back to day one, at the end of a 30 day deferred period.

Generally the maximum period that a Redundancy Insurance will pay a claim for is 12 months. If you have received payment in lie of notice, payment will not be made for this period.  During the claim, you must be available and actively seeking work.

The message is clear, when searching for a Redundancy Insurance, be clear about what you are looking for, and read the terms and conditions carefully.