Protection From Unemployment Fears

Fear of redundancy and no savings? Many people find themselves in this situation and are forced to think about what they would do if their job was lost. The state benefits are very minimal. The Job Seekers allowance is at PS64.30 per semaine (PS50.95 for people under 25). This is compared to:

  • According to the Retail Food Consortium June 2010, the average monthly grocery bill for a family is PS428.
  • The average home in band D is subject to a monthly Council Tax of PS120 (Telegraph March 2010).
  • According to the Money Saving Expert, the average combined annual electricity and gas bill is PS1000

According to the Centre for Economics and Business Research, March 2010, they calculated that an average UK household earned PS552 per week. The basic cost per week was PS403, leaving no room for discretionary spending.

People who lose their jobs cannot just stop paying the bills and expenses that come with it. While everyone has their own bills and expenses, this research shows that an average household will need PS1500-PS2000 per month to meet their current obligations and avoid spiraling debt.

Even if you are notified months in advance, redundancy can be devastating enough. Many people feel like they are on an emotional rollercoaster. This is the worst time to make financial decisions. A new job could be anywhere from one week to one year away. Until another paycheck comes in, nobody knows how much money they’ll need. The Office of National Statistics August 2010 reports that 48% of 2.46 million people who are unemployed or seeking work have been out of work for less than six months. 19.6 percent was the rate of unemployment between 6 and 12 months. Surprisingly, 32.3 percent were unemployed for more than a year.

A single earner would require between PS9,000 to PS15,000 to pay their regular bills if they were unemployed for six months. The possibility of long-term unemployment and increasing debt is a growing concern.

How can we avoid major debt?
People will typically look to reduce their expenses after redundancy. A car loan, for example, can become a significant problem for someone who is laid off. It is easy to just say “sell the car!” The likely depreciation of its value would result in barely paying down the loan. Worse, many jobs require the use of a vehicle. You should also consider family obligations. Access to a reliable vehicle is essential for many tasks, including picking up children from school and visiting elderly relatives. People can’t put their family’s lives on the line while they search for a new job. It comes with a price.
If they felt brave, those with more than PS10,000 in their bank accounts could try to get another job in less time than six months. This money will not only save their lives, but it will also prevent them from falling into debt and anxiety. It is vital to have the money to pay regular bills when you are unemployed. This allows you to focus on other work.

Finding the right job can be a major concern for many. It is important to maintain self-esteem. It is equally important to find the right job as well as not be driven by financial gain to grab the first opportunity that comes along. Another reason to have the money to fall back on is to give the job seeker the time to search for a better position with the right salary. People also want to avoid stressful jobs or those for which they are not suited. Part-time work can lead to personal discontent and a decline in living standards.

There are no savings There’s an alternative
Employees of a company that has not announced cuts or redundancies are eligible for Unemployment Insurance. This is often used as an alternative to having savings in the bank. For a monthly premium of around PS35, you can buy policies with the PS1000 per month benefit online. This same coverage can be purchased at least twice the price from banks or building societies. Source: Money Saving Expert Guide for MPPI Insurance. You should shop around to find a great deal.

The concept of Unemployment Insurance is straightforward. It is much easier to take out insurance for PS35 per month if you don’t have any savings or enough money to last a few months than it is to save up the funds to pay your bills in case of redundancy.

Unemployment insurance has the advantage that it pays out if the policyholder becomes disabled. These policies usually cover both accident and sickness, as well as redundancy. This coverage is available to anyone who works more than 16 hours per week, as well as the self-employed.

Many Unemployment Insurance policies include the ability to hire re-employment specialists. They can help with finding vacancies, preparing for interviews and creating a modern resume. Expert help can be a big advantage over the individual trying to do it all alone. Some providers include ‘Carer Cover’ which pays a lump sum to the policyholder if they have to take time off to care for a family member.

Unemployment Insurance can be purchased under two categories:

  • Mortgage Payment Protection Insurance is the first. It covers mortgage repayments and usually covers up to 25% for household bills. This insurance is often the most affordable, as there is a lot of competition from lenders, mortgage brokers, and even low-cost online providers.
  • Second is short term income protection, or lifestyle protection insurance as it is often called. This lifestyle cover allows people to pay any number bills but it usually only provides a maximum monthly benefit of PS1500 to PS2000.

How do you get great value
Dennis Haggerty, the Marketing Manager at i:protect, commented. “Our customer research has shown that although people who purchase Unemployment Insurance have some savings, their money won’t last if they are unemployed for more than two to three months. People choose policy benefits that average around PS1000 per monthly. This policy benefit is a good value, as it covers the basic bills and leaves enough savings to cover day-to-day expenses.

It is difficult to recommend Banks and Building Societies as a place where you can buy this insurance. The Competition Commission criticized them and fined them heavily for mis-selling this product. Lloyds Bank has now pulled out of the market. Despite their high premiums, major insurers like Aviva and LV still strongly support the sector.

Money Saving Expert’s guide on MPPI is extremely useful and shows consumers where to find the best deals. You can also find mortgage insurance on the Money Supermarket website, which allows you to compare low-cost online providers. If you have a medical history or previous employment, an IFA or specialist broker may be able to assist you.

Dennis Haggerty FCII M IDM Marketing Manager specialises in the supply of low cost on line Unemployment Insurance, Lifestyle Protection, Income Protection and Mortgage Payment Protection Insurance.