Planning how to cope with a long period of unemployment is best thought about when things are still going well

These are the key recommendations – the Top Ten Tips - from my article about Unemployment Insurance that has been syndicated internationally. As an Income Protection expert author, I am seeking to raise the profile of Income Protection and its derivatives including similar products such as Unemployment Insurance, Mortgage Payment Protection Insurance and Lifestyle Protection being of more importance now than ever.

Through economic necessity the Government are set on a course to roll back state benefits and support for all but the most needy. Therefore the majority of people in work will need to find the money to support their family and themselves if they find themselves unable to earn through job loss or illness. This is especially true for the self employed. With economic activity in the UK struggling to create enough jobs to replace those being lost, people find they can be unemployed for an average of close to 8 months. This is a long period to sustain a home and family unless you have significant savings to fall back on.

If you do not have savings and fear being forced into a spiral of debt if you lose your job, Unemployment Insurance offers you a low cost solution. However most people are unfamiliar with this type of cover, so the following top ten tips offer you the ‘insider’s secrets’ to selecting the right cover for you at the best price.

Top Ten Tips

1. Look for the right product at the outset – don’t waste your time

The terms used by insurance companies can be .confusing, so it is important that you know exactly what you are looking for. This is more complicated than it seems, as many insurance providers do not always name their products ‘Unemployment Insurance’ or ‘Redundancy Cover’. You will sometimes need to look for ‘Lifestyle Protection Insurance’, ‘Income Protection’ or something similar. Confusingly, full term Income Protection Insurance does not cover unemployment, it is actually for long term disablement until retirement. Don’t waste time needlessly researching the wrong product.

2. Ten percent saving or more selecting Mortgage Payment Protection

If keeping up the payments on your mortgage is your main concern, you may want to consider Mortgage Payment Protection Insurance (MPPI), as it is competitively priced and may be the best option to suit your needs. If you do not have a mortgage and just need to cover rent and living costs, you will want short term Income Protection or Lifestyle Protection.

3. Check on-line first

Research on-line is the best place to start to get a broad overview of the kind of policies available and the prices charged. Use comparison websites, such as Money Supermarket, as they will give you a good idea of which providers are out there and how they stack up against their rivals.

4. Get a feel for what the market will offer you from the comparison websites

When using comparison websites, restrict yourself to the biggest, best known ones. Other supposed comparison websites simply want to sell on your contact details and leave you open to a world of spam mail and junk calls, which is not pleasant for anyone.

5. Big brands mean big premiums, look for the specialist

Specialist providers have the best reputation for offering value for money. Unfortunately, you may not be familiar with the names of these companies, which makes using comparison websites useful to identify them. Money Saving Expert recommendations for Mortgage Payment Protection Insurance are also a good option for finding the best value providers.

6. Selective Underwriting means lowest prices

The providers with the lowest premiums are almost always those that are particularly selective about who they cover. If you are fortunate enough to meet their criteria, you can expect to pay a lot less than you would from other less discerning providers. You will find it works the opposite of motor insurance, as the older you are, the more expensive your cover will be.

7. Don’t have a steady job? Good deals are hard to find

Many providers will not be willing to offer you insurance if you have been made redundant in the last year, have been your job for less than six months, or work for a company which has begun to make cutbacks. You may find that only the most expensive will be prepared to cover you, particularly if you work in areas of the economy where job losses are forecast such as Local Authorities or public works civil engineering.

8. How Underwriters view your application

You are unlikely to be offered instant cover, as providers like to make thorough checks on your situation before they accept your application. They may focus on your employer to see if cutbacks are planned, and look into your medical background if your policy includes accident and sickness cover.

9. Although their service adds to the price, brokers can help

A local mortgage broker or an IFA can usually sell you with a suitable insurance policy, but you rarely get a choice of provider. Naturally, you should expect to pay considerably higher premiums because you are relying on their professional expertise and they handle all of the paperwork for you. With this option, it is important you know exactly what your requirements are before you speak to an intermediary. Just bear in mind they are very likely to see any discussion as an opportunity to also sell you a whole host of financial and insurance products you may not be able to afford.

10. Always complete an application honestly

To ensure that people don’t take out Unemployment Insurance just before their employer publicly announces redundancies, insurers all have an exclusion period (between 90 to 180 days) after your policy starts. This means you can’t claim for unemployment that arises during this period. It is intended as an anti-fraud measure, but it is possible for an entirely innocent person to be caught out by a sudden change in their employer’s fortune, so it is something you need to be aware of.

Prefer to read the full version as a PDF?  Please click here to go to the web page where you will find a link in the left hand margin of the page.  

Author: Dennis Hagggerty FCII, M IDM Income Protection Expert

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Tags: cheapest Mortgage Payment Insurance, Income Protection Insurance, Mortgage Payment Protection Insurance, Redundancy protection, unemployment insurance

This entry was posted on Wednesday, April 27th, 2011 at 3:19 pm and is filed under Income Protection Insurance, Mortgage Payment Protection Insurance, Uncategorized, Unemployment Insurance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.