How to Protect yourself against redundancy

How to Protect yourself against redundancy by Michael Cheary Is it worth insuring yourself against redundancy?You might think it won’t happen to you, but new research by the Money Advice Service has found one in three of us have been affected by a situation that leaves us without a salary. Often this is a result of losing your job or being unable to work â€" whether through redundancy, illness or an injury that has stopped them working.If you or your partner lost your job, how long could you last before getting a new one? Do you have a plan in place to keep you going?The truth is, probably not. We found only a third of those who had experienced one of these financial shocks in the last five years had some kind of protection insurance in place to cushion the blow. That leaves a huge number of people exposed if the worst were to happen.Protecting yourself against redundancyRedundancy can often come out of the blue, and looking for a new job can take a long time. It’s certainly worth aiming for three months of expens es in an emergency savings pot to help you weather the storm.However, if you struggle to find a new job, you’ll find your savings disappear very quickly. You might be entitled to some state support, but it probably won’t be enough to support you.Types of protection insuranceInsurance is another option. There are a number of insurance policies out there, which will help you manage financially if you are made redundant.One type is short-term income protection. If you are made redundant or are too sick to work for a short period of time, usually 12 months, this type of insurance can help cover mortgage payments and other outgoings.Another choice is mortgage payment protection insurance (MPPI). This will cover your repayments for a set period if you lose your job. Payments normally start three months after redundancy and last for the next 12 months.Though widely mis-sold, Payment protection insurance (PPI) could offer some useful protection in the right circumstances. It is designed to cover your loan or credit card repayments for a specified period, usually 12 months, if you lose your job (or are too ill to work) and can’t afford the repayments.When to get protection insuranceIf you have people who depend on your income â€" and our research found two in three UK adults do â€" you might want to consider an insurance policy.The question you need to ask yourself is could you cope if you lost your job? You also need to work out if can you afford to get a policy now. Prices can often be lower than you think, and cutting back on small extras such as a daily coffee or takeaways could be enough to provide you some form of cover.When to avoid protection insuranceIf you have no dependents and work in an industry where there are often vacancies, you might feel comfortable solely building up a savings buffer.Not every situation will be covered by protection insurance, for example voluntary redundancy or if you take out a policy after you know redundancy might be happen ing, so read the policy carefully.On top of this, a lot of policies don’t pay out for the first few months (you can decide how long when you select your policy). So, if you think you’ll be able to find a new job in that timeframe, it might not be worth taking out a policy.