Unemployment cover usually pays out a monthly benefit after a deferred period. The deferred period can be up to six months, and as little as 30 days, and the benefit can be paid monthly until you return to work, or for up to 2 years which ever happens sooner. Some unemployment insurance policies will cover you up to a percentage of your salary. In most cases this is about 50% of gross income. Others will cover you up to a percentage of your mortgage payment, again this varies from provider to provider, but is usually between 100% and 150% of the mortgage payment.

More flexible unemployment insurance policies will cover you up to a set amount, and not link it to your salary or mortgage payment. For example, if you earned £2,000 per month before tax, you could still potentially cover yourself for your full income, and the benefits are usually tax free.

If you have already received notification that there will be redundancies in your department or company, it is too late to take out this type of insurance. This can be compared to trying to take out life insurance after being diagnosed with a terminal illness. It is therefore important that you take out this type of insurance sooner rather than later.

A key factor when thinking about unemployment insurance is the exclusion period. If the exclusion period has not passed before you are told you are being made redundant, even if you are made redundant after the exclusion epriod has passed, you will not be able to claim, and this is to help stop applications where the policy holder knows that they will soon be made unemployed. The exclusion period can be anywhere from 30 days to 180 days, and we strongly recommend that you take a policy with a short exclusion period. There would be nothing worse than having a policy in force for ten weeks, and then being told you were being made redundant and then finding out your policy has a 90 day exclusion period! What a waste of money.

There are a few policies out there with a 30 day exclusion period, so if you get offered a policy with worse terms than this, it would do you no harm to continue searching for a more suitable policy.