Will My Income Protection Policy Pay Out if I am Made Redundant?
Income protection provides up to 75% of your regular income if you are unable to work due to sickness or illness. However, in cases of redundancy, cover is treated differently.
When will a policy replace income in the event of a redundancy?
This depends on what type of insurer provides the policy.
- From a general insurer. There are some income protection policies available from general insurance providers that will provide income replacement for involuntary redundancy. It’s crucial to be aware of the conditions applied to these policies in order for a benefit to be paid.
- From a life insurer. Income Protection Insurance from life insurance companies may offer income replacement if the policyholder is made redundant. This is usuallly an optional features on some policies and only covers you for a limited amount of time (e.g. 3 months). There are other features that can assist redundant workers e.g. waiver of the policyholders premiums if they are involuntarily unemployed for a certain period.
Income protection features that offer assistance if made redundant
As stated previously, there are some policies offered from Australian life insurers that give policyholders assistance under certain events.
Involuntary redundancy insurance from general insurance brands
As mentioned previously, there are a number of general insurance providers in Australia that offer a benefit payment in the event of involuntary redundancy. While this can be an appealing feature for many, it is important for applicants considering this type of policy to consider the common requirements.
- Policy must have already been in force for a defined period.
- Policyholder must prove that their redundancy was in no way related to their own performance.
- Policyholder must be continuously employed for a defined period prior to lodging a claim.
- Benefit is only paid after a defined period of time from which policyholder has been made redundant.
- Policyholder can have no stream of income during this period whatsoever, this may include part-time or casual work.
- Limit on benefit payment and benefit period.
Despite these restrictions, these policies can still provide an adequate level of protection for people with certain financial needs. It is important for anyone considering these types of policies to not base their decision purely on an unemployment feature. Always consider the policy exclusions and the other features available.
Who offers redundancy insurance in Australia?
There are currently not many providers in Australia offering full redundancy cover in Australia though this may change with the arrival of more general insurance providers giving applicants this option.
General insurance providers
As stated previously, there are a number of General Insurance providers with products that will offer cover for redundancy in Australia.
Both Comminsure and OnePath/ANZ feature income protection policies that will provider cover for loans that current customers currently hold with them i.e. mortgages or personal loans.
There are also a number of insurance providers that will offer a premium waiver for involuntary redundancy to ensure you can maintain your policy during unemployment but not be weighed down by payments. This will usually only be offered for a maximum period of time.
Will is a personal finance writer for finder.com.au specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won’t leave them underinsured.
Involuntary Unemployment Cover in Australia
Involuntary unemployment cover is offered by some income protection policies but it must come from a ‘general insurer’. Find out more.
Does Income Protection Insurance Cover Redundant Workers?
Find out if income protection can cover you if you’re redundant.
Loss of Job Insurance
Is there any support offered from income protection to workers that have lost their job?
Bill Protection Insurance
Bill Protection insurance offers cover if you’re unable earn an income for reasons including injury, illness and redundancy. Read on to compare your options.
Lifestyle Protection Insurance
Looking for cover that can protect your lifestyle when you’re unable to work? Consider a lifestyle insurance policy.
Ask an Expert
I am currently on long term workers comp. payments have just reduced to an award amount. I have income protection as part of my employment contract which I am about to utilise to top up payments. This will run for 2 years. I also have income protection with my super. Can I use it when the other is finished?
Thanks for your question. finder.com.au is a comparison service and we are not permitted to provide our users with personalised financial advice. Whether or not you ll be able to claim for income protection from your super fund will depend on their claim conditions. You should contact them directly as they will be able to advise you on this matter.
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