Does income protection cover redundancy? (UK 2026)
In short, no — a standard income protection policy pays out when illness or injury stops you working, not when you are made redundant. Redundancy and job loss are covered by different products: unemployment cover on its own, or combined accident, sickness and unemployment (ASU) insurance. This page explains the difference, what each pays, and the exclusions to watch for.
The short version
- Standard income protection does not cover redundancy. It pays a monthly benefit when illness or injury stops you working — job loss is not an insured event.
- Redundancy is covered by a separate product: stand-alone unemployment (redundancy) cover, or combined accident, sickness and unemployment (ASU) insurance.
- Only involuntary redundancy counts. Resigning, voluntary redundancy, or losing a job you already knew was at risk when you took out the policy is not covered.
- Unemployment payouts are time-limited — typically up to 12 months per claim, commonly replacing around 50–70% of your pre-tax income.
What covers illness, and what covers redundancy
| Cover type | Pays out for | Typical benefit | Typical payout period |
|---|---|---|---|
| Income protection | Illness or injury that stops you working — not redundancy | Around 50–65% of gross earnings, paid tax-free | Until you recover, or up to retirement on full-term cover |
| Unemployment (redundancy) cover | Involuntary redundancy or job loss only | A chosen monthly amount, often up to around 65% of income | Usually up to 12 months per claim |
| Accident, sickness & unemployment (ASU) | Illness, injury and involuntary redundancy combined | Around 50–70% of pre-tax income | Usually up to 12 months (some policies up to 24) |
| Mortgage payment protection (MPPI) | Accident, sickness or unemployment — but only your mortgage payment | Enough to cover your monthly mortgage payment | Usually up to 12 months per claim |
Indicative ranges for orientation only — not a quote. Actual cover, limits and premiums are set by each insurer’s policy terms and underwriting. Figures reflect the typical UK market position in 2026.
Why income protection excludes redundancy
Income protection is a health-based policy. It is designed to replace part of your income when a medical problem — an illness or an injury — means you cannot do your job. Redundancy is an employment event rather than a health event, so it falls outside what the policy insures. The claim test is whether you are medically unable to work, not whether you have a job to go to.
That is a deliberate design choice, not a loophole. It keeps income protection premiums priced around your age, occupation and health, and it is why the cover can continue paying for years — potentially to retirement on a full-term policy — where redundancy cover is short-term. If you want protection against losing your job as well as against ill health, you need to add unemployment cover or choose a combined ASU policy. See the income protection hub for how the core cover is structured, and short-term vs long-term income protection for how long benefits can run.
What covers you for redundancy instead
To insure against job loss you need a product built for it. Stand-alone unemployment cover pays a monthly benefit if you are made involuntarily redundant. ASU (accident, sickness and unemployment) insurance bundles that together with cover for illness and injury, so a single policy responds whether you are off work through poor health or a redundancy. Mortgage payment protection (MPPI) is a narrower version that covers only your mortgage payment rather than a share of your whole income.
All of these share the same shape: a short waiting (excess) period before payments start, a benefit capped at a percentage of your income, and a limited payout period — commonly up to 12 months per claim. Because the unemployment element is short-term and higher-risk, it is priced differently from health-only income protection, and most policies only pay for involuntary job loss. If your main worry is a long illness rather than redundancy, weigh this against full income protection — the is income protection worth it? page walks through that trade-off, and income protection cost covers the pricing.
Exclusions and limits to check
Unemployment and ASU policies carry conditions that catch a lot of people out. Cover is normally for involuntary redundancy only — resigning, taking voluntary redundancy, or being dismissed for misconduct is not covered. There is usually an initial exclusion period (often around 60 to 120 days from the start of the policy) during which a redundancy claim cannot be made, and you cannot claim for a job loss you already knew about, or had been warned of, when you took the cover out.
Other common limits include a waiting (excess) period before payments begin, a requirement to have been in continuous employment for a minimum period, and restrictions for the self-employed — who often cannot buy the unemployment element at all, because there is no employer to make them redundant. If you are self-employed, the self-employed income protection page explains what is realistically available, and income protection vs Statutory Sick Pay covers the health-related safety net. Always read the specific policy wording — this page is general information, not advice on your circumstances.
Income protection and redundancy FAQs
Information only — not financial advice. My Insurance Expert is not an FCA-authorised intermediary and does not arrange or sell policies. Cover types, exclusions and payout limits vary between insurers and can change; always check the specific policy wording. Last updated: 2026-07-02