Income Protection And Redundancy

Generally, income protection policies available in Australian do not cover redundancy or involuntary unemployment.

However, select insurance companies do provide a certain income protection policy that includes a benefit which may cover your mortgage for a certain period if you are made redundant.

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Commonwealth Bank Redundancy Insurance

CommInsure, the Commonwealth Bank’s (CBA) insurance division, offers an unemployment benefit as part of their income protection cover.

CBA’s income protection redundancy benefit pays 1/30th of your monthly benefit for each day of unemployment if:

  • You were made involuntarily unemployed.
  • You have a loan with the Commonwealth Bank.
  • You were employed for at least 180 consecutive days prior to unemployment.
  • You remain unemployed for at least 60 consecutive days.

The benefit will cease being paid when:

  • You no longer have a loan.
  • When you become employed again.
  • When the benefit has been paid for 3 months.
  • If you receive a TPD, terminal illness, trauma or another benefit under an income protection policy or any other insurance policy.
  • The policy ends.
  • The cover expiry date is reached.
  • If you pass away.

OnePath Unemployment Benefit

OnePath, the insurance, investment, and superannuation division of the ANZ Bank, offers an Unemployment Benefit as part of its OneCare policy.

The Unemployment Benefit pays your minimum loan repayments on home, investment, business, personal or margin lending loans from the ANZ Bank. It pays a maximum of $5,000 per month for a maximum of three months.

Criteria:

  • The loan must be with ANZ.
  • You must become involuntarily unemployed.
  • You must remain unemployed for at least 30 days.
  • You must be registered with an employment agency and be seeking work.
  • You must have been employed for at least six consecutive months prior to unemployment.

You can only make one claim under this benefit every 12 months and a maximum of three claims over the life of the policy.

Be wary of income protection which includes redundancy

When an insurer claims to fully protect you against unemployment or redundancy, it is often too good to be true and they often come with a number of criteria:

  • Only available if you are between the ages of 18 and 60.
  • Only available if you are working at least 20 hours per week.
  • Your policy must be in force for at least 6 months before you can claim.
  • You must be out of work for at least 28 days.
  • You must have been employed for at least 6 consecutive months.

If your unemployment is a result of sickness or injury, poor job performance, the loss of qualifications or license, seasonal employment, voluntary redundancy, contract ending, the completion of a task or project, then the benefit will not be paid.

What does Income Protection cover?

Income protection insurance provides up to 75% of your salary should you become ill or injured and are unable to work. It is also generally tax deductible.

It allows you to recover without having to worry about receiving an income to help pay for your day to day living expenses, mortgage or rental payments and other costs.

If you need money to cover your expenses during an extended leave from work due to sickness or injury, you can bridge the gap with Income Protection Insurance.

Protect Your Lifestyle with Income Protection
Published: July 28, 2013

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