Unemployment benefit is an insurance plan, offered by various companies, that is designed to pay a monthly benefit to an individual if they were to be made unemployed. In most cases this unemployment insurance benefit is normally aimed at the employed although anyone can theoretically have this type of cover. It is possible for a self employed person to be made unemployed. Such a situation would arise if the individuals business was to cease to trade and subsequently go in to liquidation. In most cases it is not as straight forward for a self employed person to claim Unemployment Benefit. Where as an employed person has to just provide prove of redundancy a self employed individual will need evidence, normally from the HMRC, that their business is no longer in existence.
Unemployment Benefit Eligibility Criteria
There are a number of different criteria’s that an individual needs to fulfil to be eligible for Unemployment Benefit. The majority of companies offering this form of cover require that the applicant;
- Is a UK resident
- Works in excess of 16 hours on average per week
- That they have been in employment for 6 consecutive months prior to applying. This does not necessarily have to be with the same employer. However, you must not have had any breaks, other than normal annual leave (holidays), between employers as this would be classed as period of unemployment.
What Constitutes Unemployment?
Unemployment in most cases means being made redundant or being served a redundancy notice/letter. Unemployment does not mean that you voluntarily leave or position of work or are dismissed under a disciplinary action. Therefore, should your employer/company ask for voluntary redundancies, prior to issuing redundancy notices, you are not advised to volunteer if you have an Unemployment Plan in place as it would not pay out.
Additional Benefits available in Conjunction with Unemployment
Unemployment Benefit is commonly also taken out in conjunction with Accident and Sickness cover. However, at present with the current climate showing an increase in unemployment and a down turn in the economy Unemployment Benefit is being taken out in isolation. This makes the plan slightly cheaper than combined Accident Sickness and Unemployment. Though in fact it is actually the Unemployment benefit that makes up the greater proportion of the cost of the Accident, Sickness and Unemployment cover (around 66%). In certain situations an employer may continue to pay its employees during periods of absence due to sickness or injury. For example, an employer may offer 6 months full pay and 6 months half pay. Under such circumstances it obviously makes more sense for the individual to only take out Unemployment Benefit.
How is Unemployment Benefit Calculated?
Stand alone Unemployment benefit as well as combined covers such as; Accident and Sickness or Accident, Sickness and Unemployment cover, are worked out using the same principle. The first is based on your Mortgage and related cost and is known as Mortgage Payment Protection. The other, called Income Protector provides a maximum of 65% of your basic salary.
Insurance is necessary in today’s world generally when the risk of acquiring deadly diseases is increasing. With the busy life style and routine, we forget to take care of our health and fall in the traps of harmful diseases. In order to keep yourself safe against such risks and mishaps you need to protect yourself in advance so that your loved ones and family does not face hardships to pay for the loans that you have taken when you were alive.
Unemployment insurance is a kind of insurance that secures the lender against financial losses if a loan holder stops repaying his loan value. The insurance companies usually safeguards themselves through this kind of loans and need insurances on high loan values. It protects the lender company to suffer from any kind of loss in case the loan taker is held redundant or becomes ill or dies in any circumstance. When a person is not able to pay for his mortgage loan, the home goes in a foreclosure. The homeowner in such a case loses his house and the money he has put into it. The mortgage insurer will now pay the claims on defaulted loan made by the mortgage company.
Therefore, a person purchasing a home must apply for it only if he can afford to pay the installments not only when he is purchasing it but also for the time period for which he will have to pay the loan. Although the value of the unemployment insurance is paid by the buyer, the insurer company works directly with Mortgage Company. The unemployment insurance is available to mortgage and saving & loans banks, commercial banks and companies offering mortgage loans to people.
The unemployment insurance is different from credit life insurance or mortgage life insurance. This kind of insurance policy repays the outstanding loan on the demise of the policy holder.
The mortgage company decides whether to utilize the unemployment insurance as per the needs of the investor in mortgage market. Due to the losses that can happen, the major investors need unemployment insurance over the loans that are made with low down payments.
It happens with every insurance company that few of their customers are not able to repay the amount of loan in time and thus to secure themselves from the risk of losing money, they make use of insurance policies to secure themselves and safeguard their money.
As mortgage life insurance is to protect the customers taking the loan against the shortcomings and unanticipated events occurring in his life. Similarly, unemployment insurance provides safety to the companies offering mortgage to people so that they can keep earning the profits without losing on the money they lend to their borrowers.
