Dear Lifehacker, My company in the food manufacturing industry is shutting down indefinitely toward the end of 2014, and I will be made redundant. Are there any options for income protection insurance for me? Will they cover someone whose (rather large and well-known) company is closing, if I apply for one now? Thanks, Unprotected
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Dear Unprotected,
We hate to break it to you, but we suspect you may be out of luck. Income insurance providers aren’t charities — they’re obviously not too keen on accepting members who are guaranteed to make a claim soon after joining. Unfortunately, your duty of care towards an insurer includes disclosing all relevant information, and your employer going bust falls into that category. So the odds are definitely stacked against you.
If it’s any consolation, the vast majority of income insurance policies wouldn’t provide you with much assistance anyway. Redundancy cover is fairly limited in Australia. It’s generally only offered as a premium/add-on to income protection policies that cover events like illness and injury. In most cases, adding the redundancy feature merely excuses you from paying your premiums for a few months and does not include any benefit payments. In other words, redundancy insurance probably isn’t the answer you’re looking for.
It sounds like you still have a few months to get your affairs in order, which is vastly preferable to the typical two or three weeks’ notice that most people get. Our advice it to start saving as much as possible — setting up an emergency fund is a good place to start. Also dust off your resume and have a good, hard think about changing careers. I know it sounds like an empty platitude, but being made redundant really can be a blessing in surprise. Good luck!
See also: Top 9 Ways To Get A Better Job | Ask LH: How Should I Deal With Being Made Redundant? | How Can I Find A Job After Being Fired? | This Model Resume Will Help You Score Your Dream Job | Top 10 Tips For Acing Your Next Job Interview
Cheers
Lifehacker
Comments
21 responses to “Ask LH: Can I Get Income Protection Insurance If I’m About To Be Made Redundant?”
make sure you check your Superannuation plans. You will find that you may have income protection insurance bundled with your Super, you may even have multiple if you have a few Super accounts.
^^ This. I was going to say the same thing. Most employer superannuation policies will have an insurance component. Worth looking in to.
Depends on which fund you’re with, but I had the impression that it was generally only death and permanent disability cover unless you organise additional cover with your fund.
Yeah, redundancy insurance can be a little misleading depending on how you read it. I remember applying for it with my credit card company only to read the fine print and see that they were going to charge me a brand new shiny premium for the safety and security of being allowed to postpone my minimum monthly repayments if I ever lost employment. How very generous.
Probably better off without, there is no real ‘safety net’ you can buy your way into, just centrelink. (Which, that said, is better than nothing. Not much better, depending on how well you were being paid and the expenses you’ve locked yourself into re: subscriptions/mortgage/leases/contracts etc, but something.)
After 20+ years of paying my taxes, when I was made redundant last year, Centrelink were of no help to me. As I had a mortgage and some savings in the bank, Centrelink didn’t help me at all.
So, I suggest you blow all your savings now if you have any, and rent instead of paying a mortgage. Then Centrelink will be there to help you, but if you are a responsible financial citizen then your on your own.
Isn’t that the way it’s supposed to be……………………………………………..
Please explain to me why it is acceptable that Centrelink will pay rent assistance to people who rent and are unemployed, but will not provide any assistance with mortgage payments if you have a mortgage and are unemployed?
Fair shake, mate. You were unemployed and you want me to pay your mortgage so that you don’t have to eat into your savings?
You pay Rent Assistance to those unemployed who rent a house.
Why shouldn’t the same amount be paid in mortgage assistance to those unemployed who have a mortgage!
It is more stressful being unexpectedly unemployed and trying to pay mortgage payments before the bank forecloses on you.
After 20+ years of paying my taxes, at my time of need, after being made redundant effective immediately with no warning, Centerlink were unable to help me.
Dude – Rent assistance didn’t even cover one quarter of my dingy room in a condemned apartment. Seriously though, most banks will let you hold off on paying your mortgage if you become unemployed.
@bigmuz ScaryMagus is right. The most I was ever able to get out of rent assistance was about $90 a fortnight. It’s definitely token ‘assistance’.
And even if you’re renting, you can’t qualify if you have savings. Centrelink is for people who have no options left. You had more options left than an unemployed renter with no savings. BAD options, but more than the people who qualify.
I don’t blame you for the frustration, because @aretokas is right – it often seems like we’re paying for a system which mostly props up those who aren’t helping themselves because they couldn’t be bothered rather than because they can’t.
It should probably be a little more rigorous to qualify for payments. In December 2005 I quit my job in disgust at management, not fully realizing that December was a pretty terrible time to be looking for work in the corporate world. I was on centrelink payments for a month before the recruiters got back from Christmas holidays, and I was back in a job.
Six months later I got a phone call noting that I hadn’t been filling in my job-seeker’s diary, and it’d be great if I could come in sometime in the next month to get a training session on how to do that.
To say that the requirements for effort are lax is… an understatement.
When you pay rent, you do not aquire an interest in the property you are renting. Your lease is generally not an asset which you can sell.
If you have a mortgage then you own the property and any assistance would effectively constitute the government subsidising your ownership of the property. If you can’t afford the repayments then you can sell the property and use the funs to continue to support your self. Someone who is renting doesn’t have that opporunity.
I think the frustration comes from the fact that long term beneficiaries of Centrelink often just stick it out and seem to “get away with it”; while those of us who need limited, short term assistance get shafted by loopholes and “you earn/own too much” excuses.
The mortgage part is irrelevant in being able to get centrelink – the principal home isn’t counted anyway. However, you do require under $7000 in liquid assets to be able to receive centrelink, which is only about $250 a week maximum anyway, so its really not that helpful overall.
As much as I’d have loved to run out and spend my redundancy when I got mine late last year. Centrelink made it pretty clear that as it was to cover 20 weeks, then I couldn’t claim Centrelink benefits until after that time. And quite frankly that’s what a redundancy payment is designed for, to support you for a set time until you find work. So blowing it all before you find something would be ill advised.
I was in a similar boat to bigmuz with a house an investment property, and a bunch of savings. But I was pretty lucky having something lined up only hours after being made redundant.
If anything if you work in a particular industry and want to stay in it like I did, lean on your contacts. Now more than ever before the axe falls. Best contacts are those who have already left and moved to a competitor or supplier.
Mate I was made redundant last year, that too in a new job only 1 week shy of knocking over my probation period. I had (and still have) a mortgage, a stay at home mother and a young son. My mortgage was eating into my savings of less than $40K, at a rate of $2k per month, on top of bills etc coming my way and the general expense of living, eating and mandatory travel. Not sure about you, but one thing I did was always pay ahead on my mortage. I paid weekly instead of fortnightly or monthly on my repayments, and also threw in a little extra each week on the largest portion (as I have a split loan) close to $300K. This put me $40K in advance of my repayment requirements. When I spoke to the bank they told me this and said that repayments would continue on that $40K and I just had to let them know once I was comfortable again for them to take from my offset account.
I do have a job now, but one thing I’ve realised is:
1. Repay more now to help you in troubled times. I was lucky I did this when I started out with my mortgage not really knowing the end benefit as I do today.
2. Spend wisely. Lucky for me, I’ve always been a wise spender and because my household has always been on a single income, I continue to spend based on a future of a single income as I dont know when another income will start streaming in to reduce the financial burden.
I also spoke to Centrelink who said that most people, after losing their jobs will find a new place of employment within 3 months. They were willing to help me with some financial assistance but only after 3 months from the date of my redudancy, and that too was going to be around $350 a week. Not much and not enough to pay a mortgage, but then the mortgage was my choice, not the choice of Australia or Centrelink who you’re expecting to pay your mortgage for you in your time of need. Im glad Centrelink operate the way they do, and mostly help those who need it, however I do understand your pain. The best thing is if you’re not ready for everything that comes with a mortgage and the risks, dont take up a mortgage, or sell up and rent as a responsible citizen.
I thought income protection was for if you were sick for an extended period or injured, does it actually cover being made redundant, if so for how long?
Edit: Just checked mine, does not cover redundancy.
Despite income protection not helping out in this circumstance, I still strongly recommend it.
If arranged through your superannuation it is not only cheap, but effectively tax free. I found myself needing to make an income protection insurance claim after health problems forced me out of work, and the difference it made to how things have panned out is enormous.
I think this an American article, in Australia Income Protection Insurance covers sicknesss or disability, rather than unemployment. Don’t know why the LH writer can’t customise for local conditions.
Did you actually read any of the post’s content before commenting?
From the article:
Bazinga! Pity it was a guest poster, they’ll probably never see your comeback 🙁 Don’t you hate that?