What's the difference between Income Protection and Unemployment Insurance?

One fear that lingers in the back of many people's minds is suddenly losing their income and becoming unable to provide for themselves or their loved ones. While many people will be lucky enough to avoid this fear becoming reality, others could run into problems that cause them to lose their job or be deemed unfit to work. If your income is suddenly stopped, investing in a good insurance policy could provide you with the support that you need to continue providing for those that you love, and stay afloat while your income may not be that reliable.

When it comes to securing income safety, there are two types of insurance that you could consider: income protection insurance and unemployment insurance. Both types of insurance help those who are unable to work or have no income coming in each month. To help you choose between the different options, this article will guide you through what each insurance policy provides and the main differences between income protection and unemployment insurance.

What is income protection insurance?

Income Protection Insurance is a policy that will support you in the event that you are unable to work due to illness or injury. If you have income protection insurance, you can be financially supported until you retire, return to work or pass away.

Income Protection Insurance can be a life-saver in times of crisis, however, some people can find them a little pricey if the risk of leaving work due to illness is low. In this case, it is possible to invest in a short-term income protection insurance policy that will pay out for just one or two years if you have to leave employment due to illness or injury. These policies are often much lower in cost, however, they will only support you for a limited time.

Income protection insurance does not pay-out if you are made redundant or fired and are unable to find further work. However, the policies will often provide 'back to work' help if you have taken time off sick.

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What is unemployment insurance?

Unemployment insurance is an insurance policy that can be claimed if you find yourself out of work due to factors that are no fault of your own. Unemployment insurance, also known as work insurance, is paid monthly until you can find a new place of work.

If you quit or are fired from your job due to your actions, you will not be eligible for unemployment insurance. Those who are fit for the insurance are individuals who were forced to leave their role due to lack of work, business closure, or any other instance that was not due to their fault.

Unemployment insurance will cover you until you find a new job and many providers will also offer redundancy insurance, which will cover you if you are made redundant. To be eligible for unemployment insurance, you must pay monthly premiums to an insurance provider.

Income protection insurance vs unemployment insurance: Which one should you get?

The policy that you choose to set up will depend on what you think poses a bigger risk for you and your family. If you fear being out of work due to illness or injury, where you may be unable to work for a long period of time, you should consider full income protection insurance. If you fear being forced to take time off work due to injury but expect to be back in the next year or so, short-term income protection insurance will be the best option for you. You never know when you may fall ill and, if you have a family to support or debts to pay, going without any income is never an ideal option. Taking out income protection insurance will protect you in times of illness or injury and will provide you with the financial security that you need.

Unemployment insurance is best for those who fear being forced out of work without fault. To qualify for this insurance, you must be able to prove that the reason for your unemployment is not your own and you must actively seek further work to keep yourself financially supported. If you have a family, debts, or a mortgage to pay, taking out unemployment could be an excellent decision. For every 1000 employees, 3.8 will be made redundant, leaving them without any income. Having an insurance policy will help to keep you on your feet if you find yourself falling victim to a job loss for reasons that weren't your fault.

The past 18 months have shown us how circumstantial changes in our employment industry or changes in our health can have a big impact on our lives and our income. Without income protection or unemployment insurance, many workers would have been left with no money coming in to support themselves or their families. You never know when you might fall ill, so having a good income protection insurance policy is an excellent investment. To get a quote or to find out more about what income protection could do for you, feel free to