Income protection insurance generally provides benefit when you become unemployed temporarily due to injury, accident, or illness. Even though it covers 75% of your gross annual income, not many companies offers you a redundancy cover. So, read the terms and conditions of the policy whenever you purchase one to understand more about the inclusions.
What is Redundancy Insurance
Redundancy insurance or unemployment cover refers to policies that pay monthly income benefits in case of involuntary redundancy or job loss. It is a type of income protection insurance, but the benefits can be temporary or permanent. Depending on the duration of cover, the premiums will also vary. For instance, you might need to pay a higher premium if you want benefits for more than one year. At the same time, remember that all income protection policies do not cover for redundancy.
Duration of Coverage
The extent of cover depends on the insurer. The standard period for this type of insurance is 12 months. If you need cover for 24 months, a higher premium may apply.
In Australia, redundancy cover is given only for people who meet certain criteria. In order to apply, you must be an Australian resident. Some insurers also accept 457 visa holders. You should also be between 18 and 65 years of age. As redundancy cover is not meant for unemployed people, it is important that you should be engaged in full time employment for a period of 12 months. This rule applies even when you want to make a claim. Moreover, you will only get the benefit if you have become unemployed due to illness, injury, or accident. It does not cover for unemployment after a fixed term contract. Furthermore, self employed people are not covered by the policy.
The application process is really simple – online or over the phone. You will be covered on the same day. The level of cover does not depend on your income, and it ranges between $2,000pm to $4,000 pm. About 75% of the income can be covered. For $2,000 pm benefit limit, you will need to pay around $194 to $277 per annum. In case of accidental death, your family will receive a single lump sum payment as decided by the insurer. Most insurers also offer additional benefits including expatriation benefit, carer’s benefit, and funeral benefit. Expatriation benefit is intended for people who need to stay overseas for employment purposes, while carer’s benefit can be received when you quit your job to care for an immediate family member. Funeral benefit covers burial or cremation costs in the event of an accidental death. When you apply for income protection insurance, it is recommended that you also choose a redundancy cover.