It is a great shock to suddenly lose an income, in the current economic climate this is happening more and more frequently. Employees can take steps to protect themselves though. Your first line of defence will be your redundancy money, any pay in lieu of notice and your ‘rainy day' savings. However, there are also various insurance products on the market.



Stand alone cover for unemployment only is the simplest insurance option. This is becoming increasingly harder to find. An insurance specialist at moneysupermarket.com, the price comparison service said, "Many of the biggest suppliers of unemployment cover have withdrawn their policies from the market recently, or stopped selling them through certain channels,"

"All the providers we deal with have taken their unemployment-only policies off our website – for some this is because they do not want high sales volumes at the moment." The insurance specialist added that one insurer, British Insurance, was still offering cover on a stand-alone basis.

If you combine unemployment cover with other types of cover then it will be easier to find. For example, accident, sickness and unemployment insurance, also known as ASU, is still available. The specialist said. "We think you should think about all types of event that could affect your income rather than just focusing on your current fears," she said. "There are no jobs for life any more and some companies are cutting their sick pay."

She also added that there had not been a significant withdrawal of ASU policies and there are still lots of insurers to choose from. ASU policies cost between 4 and 6 pounds per 100 pounds of cover. The insurance specialist said. "Do not just buy the cheapest though," she added. "Policy wordings do vary so make sure the cover caters for your own needs and circumstances."

You will receive payouts for unemployment for a year at the very most. This is the same for both stand alone and bundled policies. At the moment insurers have not increased their premiums, despite the economic downturn. This could change soon though.

Another aspect that could change in the not so distant future is increased premiums for ‘riskier' jobs. At the moment ASU policies are not subject to underwriting conditions based on the policy holder's occupation. Basically, insurers do not assess how much you are at risk of losing your job.

Payouts could be delayed because of two factors. The first is that you are unlikely to get any payments under the unemployment part of the cover in the first 90 to 120 days of commencing the policy. This is the insurers protecting themselves against people covering themselves when they suspect they could be losing their jobs imminently.

The second is that even after this restriction has expired, policyholders may receive nothing for the first one, two or three months of unemployment. They can choose which period suits them. If you opted for cover that pays out immediately then the premium will be much higher.

You will not be able to claim, if you know that your job faces specific risk, "If you're worried, it makes sense to buy sooner rather than later," the insurance specialist said. "Do not leave it until your job is actually at risk – that is too late."