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Redundancy Income Protection Insurance

What is redundancy insurance?

Redundancy insurance is a short-term protection that offers financial support if you lose your job involuntarily. It pays a percentage of your gross monthly income to help pay your bills until you find a new job. The amount is typically tax-free and may continue for up to 12 months, depending on your policy.

Who can get redundancy cover?

Eligibility for redundancy insurance in the UK can vary between providers. However, most insurers set these standard requirements and exclusions.

Who is eligible for this cover?

Full-time employees with a minimum of 16 hours per week.

Those who have been continuously employed for at least 6-8 months before the redundancy.

People without prior knowledge or warning of redundancy or restructuring of their company before taking out the policy.

Applicants who are not already under notice of redundancy.

In some cases, applicants must be under the age of 65.

The redundancy must be compulsory, not voluntary.
Applicants must register as unemployed and actively seek employment after being made redundant.

Who can be excluded from redundancy protection insurance?

Self-employed individuals.
Directors, shareholders, or individuals with significant control or ownership of the company.

Part-time workers, working less than 16 hours per week.

Temporary, fixed-term, or agency workers.

Those who opt for voluntary redundancy.

Those who resign.

Those dismissed for misconduct.

People who are aware that their job is at risk at the time of taking out the insurance.

What does redundancy insurance cover?

Exact coverage varies across different policies and the protection you choose to include. Here are some of the common options and exclusions you can find on this coverage.

Usually covered

Income protection insurance with redundancy cover replaces a percentage of your income for a set term if you lose your job involuntarily.

It covers redundancy due to business restructuring, cutbacks, employer insolvency or administration.

It offers a fixed, tax-free monthly payout, usually between 50% and 70% of your salary, typically for 12 months or longer, depending on the policy terms.

Typically not covered

Voluntary redundancy.

Resignations or dismissal for negligence or misconduct.

Claims made during the policy’s deferred period.

Redundancy due to circumstances known about before the policy was taken out.

Self-employed, part-time, temporary, or agency workers.
Unless included, loss of income due to illness or accident.

Types of redundancy protection

Standalone redundancy cover

Only covers income loss due to involuntary redundancy.

Accident, sickness, and unemployment (ASU) insurance

ASU insurance covers loss of income due to redundancy, as well as accident or sickness.

Income protection insurance

Income cover you if you lose your income due to illness or an accident. This does not include redundancy cover.

Payment protection insurance (PPI)

Focuses on specific payments like your mortgage or credit card payments if you lose your income.

How much does a redundancy policy cost?

The cost can vary because premiums are based on several factors related to your circumstances.

Your age

Younger people usually pay less as they have a lower risk of redundancy than older workers.

Your occupation and industry

Riskier sectors may have more layoffs, so they typically cost more.

Level of cover required

The percentage of your salary you want paid out will affect the cost.

Benefit period

Typically 12 months, although some may cover you up to 24 months. The lower your benefit period, the less youll likely pay.

Deferred/waiting period

Waiting longer for the waiting period before the policy starts to pay could lead to a reduced premium.

Optional extras & bundled coverage

Policies that include cover for other income risks like illness and accidents will usually cost more than a standalone redundancy policy.

How to get redundancy protection insurance?

We can help you find multiple redundancy protection quotes by filling out the form on our website. We only work with reputable insurers who can offer you customised quotes. Comparing quotes is a good strategy to help you find the policy that best suits your needs.

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Redundancy insurance cover FAQs

What specific costs does redundancy protection reimburse?

Redundancy insurance does not reimburse specific costs. Its a monthly sum of money that replaces, in part, your regular income. Its intended to help you cover regular bills like your mortgage, credit card payments, council tax, or groceries. However, you have the flexibility to use it the way you see fit.

How is the payment amount determined in redundancy cover?

When you take out the insurance, youll decide what portion of your income you want to insure and the payment period. Its usually between 50% and 70% of your monthly income.

How does the deferred period impact the payout process?

Typically, you can choose the length of the waiting period before the policy starts paying out once youve been made redundant. The longer the waiting period, say 60-90 days, the less youll pay. This is a good option if you have savings to carry you through the deferred period. However, if you need quicker access to money, you can opt for a 30-day waiting period. A shorter deferred period gives you faster payouts, but usually costs more.

Does this insurance cover accidents or sickness?

No. This insurance, on its own, is designed to cover you when youre made redundant involuntarily. It does not cover you if youre unable to work due to an accident or sickness. For this, youll need accident, sickness, or unemployment insurance, which covers loss of income due to redundancy, accidents and sickness.

Is redundancy insurance worth it?

That depends on your job stability, financial situation and backup plans. For example, if you dont have an emergency fund to cover 6-12 months, this insurance might be worth it. Those with ongoing financial commitments, limited savings, or a heightened risk of redundancy would do well to take out redundancy cover.

Does income protection insurance cover redundancy?

No. Income protection insurance does not cover redundancy protection in the UK as standard. Its designed to replace your income if youre unable to work due to injury or illness. This insurance is only for situations where youre involuntarily made redundant.

Can you get insurance against redundancy?

Yes. Its possible to get a standalone redundancy policy that provides crucial financial protection if you lose your job involuntarily. Its important to shop around as policies between insurers could differ somewhat.

What is the best redundancy insurance in the UK?

There is no single policy that is the best in the UK. It really comes down to finding the one that works best for your circumstances. Thats why we recommend comparing quotes. Always check for eligibility and exclusions to ensure you have sufficient cover.

[Lee Evans]

Reviewed by: Lee Evans
Business & Leisure Insurance Expert

Written by: Katie Gawley
Insurance Content Writer

Fact-checked by: Quotezone Editorial Team

This content follows our Editorial Guidelines

Last Updated: 29 October 2025

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