Unemployment Insurance

Is Unemployment Insurance still available in 2024?

In the past, various insurance policies were available to help offset the specific risk of unemployment or involuntary redundancy. Broadly speaking, these were likely to be referred to as either Unemployment Insurance or Redundancy Insurance.

However, in recent years, the number of insurers offering standalone Unemployment Insurance policies has fallen substantially. In 2024 it is almost impossible to find an insurer willing to offer a standalone Unemployment Insurance policy for reasons outlined below.

Instead, for those looking to offset the potential financial consequences of involuntary redundancy, an Accident, Sickness and Unemployment (ASU) Insurance may be a suitable alternative worth considering.

What was Unemployment Insurance?

Unemployment Insurance was a short-term income protection policy designed to offer financial support to individuals who found themselves involuntarily out of work. Policies generally provided a monthly benefit for up to 12 months to help cover the cost of living while the policyholder found new employment.

The monthly benefit could provide up to 65% of the policyholder’s gross annual income (normally capped a maximum of £2,000) which was tax-free.

Why aren’t insurers offering standalone Unemployment Insurance?

Following the initial outbreak of COVID-19, many insurers reviewed their exposure to the risk of a similar event causing large-scale redundancies. Some insurers withdrew products altogether where as many instead opted to continue providing the cover but only as part of a wider, more comprehensive Accident, Sickness & Unemployment policy.

More recently, in 2024 it is Black Lion Insurance’s opinion that the dramatic development seen in Artificial Intelligence and the potential it has to replace large swathes of occupations could be another contributing leading insurers to withdraw remaining policies from the market.

Accident, Sickness and Unemployment (ASU) Policy: A Comprehensive Alternative

As noted above, the UK insurance industry has gravitated towards offering more inclusive Accident, Sickness and Unemployment (ASU) policies. These policies deliver wider coverage, including financial assistance in case of an accident or illness that prevents an individual from working, as well as unemployment benefits. This helps to ensure that policyholders receive protection against a broader range of circumstances that could lead to income loss.

Benefits of an ASU Policy over standalone Unemployment Insurance

1. Broader Coverage: ASU policies offer protection for accidents and illnesses, as well as unemployment, providing policyholders with a wider safety net against potential income disruptions.
2. More Choice: Since standalone Unemployment Insurance policies are increasingly unavailable, opting for an ASU policy can provide consumers with a wider choice of insurers.
3. Competitive Pricing: Because there is a wider choice of ASU policies (and therefore more competition), insurers may have more competitive pricing compared to standalone Unemployment Insurance policies. This could provide consumers with a policy that they consider is better value for money.
4. Greater Peace of Mind: By covering accidents, sickness, and unemployment, ASU policies provide policyholders with protection against a much wider number of scenarios should they experience income loss.

In comparison to standalone Unemployment Insurance policies, Accident, Sickness and Unemployment (ASU) policies deliver a more comprehensive and adaptable solution for those seeking protection against the financial difficulties of unemployment.

With broader coverage, increased flexibility, and competitive pricing, ASU policies have the potential to provide policyholders with greater financial security and peace of mind. By carefully evaluating individual circumstances and the benefits provided by each policy type, one can make an informed decision that best meets their needs and offers the financial protection they deserve.

Qualifying Criteria

Most insurers are unlikely to consider new ASU policies for UK residents that have not been in full-time employment for at least 6 months with the same employer and are out of any probationary period. Some insurers may consider part-time employees, although this is becoming increasingly less likely.

Occupation and job title may also cause insurers to reject any new policy applications. If the current or estimated future demand for a specific occupation is deemed to be in decline, this may result in a refusal or a higher monthly premium. For example, as of 2024, massive improvements in the speed and quality of artificial intelligence technologies mean that certain professions are likely to see a fall in demand. Therefore, individuals in these professions may find that insurers are less likely to offer them a policy which includes unemployment cover.

Insurers may also consider an individual’s employer before determining whether they will offer Unemployment Insurance. If the applicant is employed by a large, listed company who has posted recent profit warnings, it is quite probable that an offer of a policy may not be forthcoming.

Finally, another factor some insurers will consider is whether the individual is a home owner or not. Those in rented accommodation may find that they are considered higher risk.

Making a valid claim for unemployment

For a policyholder to initiate a valid claim they will undoubtedly need to have lost their job due to compulsory redundancy. Taking voluntary redundancy, resigning (even if it is later proved that your employer was guilty of constructive dismissal) or getting fired (even if the dismissal is later ruled to be unfair) is unlikely to suffice for a valid claim.

Additionally, it is likely that an ASU policy will have needed to be in place for at least 120 days. This is because insurers are acutely aware that the signs of possible redundancy can often be observed by employees months before compulsory redundancies are actually announced. Indeed, UK companies are required by law to seek applicants for voluntary redundancy or early retirement before making compulsory redundancies.

During any claim period it is also possible that the insurer will require the policyholder to be claiming and receiving job seekers allowance. Should a policyholder cease to receive job seekers allowance (for example, because it is deemed that they are not making the required efforts to find work or have refused an offer of employment) it is possible that the terms of the policy will mean that the monthly benefit will end.

Do I need Insurance to cover Unemployment?

Deciding whether having an insurance policy which covers involuntary redundancy depends on a variety of factors such as one’s financial stability, job security, and existing support networks. It is important to weigh not only the immediate financial impact of unemployment but also its long-term implications on one’s overall financial health.

If you are self-employed then the addition of Unemployment Insurance to a policy unlikely to be suitable. Instead there are more tailored plans such as accident and sickness insurance for self employed.

Is adding unemployment cover worth it?

As with any type of income protection, determining the worth of Unemployment cover depends on each person’s unique circumstances. For some, the reassurance of having a financial safety net during periods of job loss can be invaluable. To make the decision easier, ask Black Lion Insurance to quote for both an Accident & Sickness policy and an ASU policy.