Redundancy Insurance – BBC Employees need not apply

There was a time when people working for large public funded organisations such as the Post Office and BBC thought they had a job for life. Regrettably those days have long since gone, but in some quarters the mind set continues.

Earlier this month the BBC announced that they plan to make 2000 employees redundant, however the percentage of employees who have some form of redundancy insurance to protect their income if they were to lose their job is likely to be very low. Now the planned redundancies have been publicised it is too late for employees to close the gap. Even if a BBC employee bought a redundancy insurance policy now, it would not pay out if they were made redundant as a result of this specific redundancy exercise.

All forms of unemployment insurance, including Mortgage Payment Protection insurance have an exclusion period for unemployment claims when the policy is first bought. In the current climate the exclusion period is typically 120 days. This means that if within the first 120 days of holding the policy you are made redundant or are made aware that your job is at risk, you will not be covered for unemployment claims. This applies even if you are made redundant after the 120 day period is expired.

While this may seem harsh, there is a sensible logic behind it. Cathy Luzmore of Best Income Protection explains “All insurance polices are sold to cover the unknown, if you know something is going to happen then you can’t get insurance for it. The people at the BBC now know that redundancies are going to happen and it wouldn’t be fair to either existing policy holders or insurers to allow BBC employees to buy a policy and claim if they lost their job as a result of this current exercise. Premiums would soar for those people who have been prudent and held cover for many years because they understood the importance of redundancy insurance”.

This doesn’t mean that BBC employees can never buy cover again, but while the current exercise is underway they will not be eligible to make any unemployment claims.

With the UK experiencing harsh economic times and drastic public spending cuts, redundancy insurance is becoming an essential insurance rather than a luxury. The Principal at Best Income Protection says “The average cost of a policy for a 40 year old, paying out £1,500 per month back to the first day of redundancy is just £50 – £60 per month. If you were to claim for the maximum 12 month period you would receive £18,000 tax free from the insurer. While this may not replace all of your income, it is significantly more that you will get from the State. You only have to speak to any of our customers who have made a claim to understand they believe it to be excellent value for money.