Question About Redundancy Insurance

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As I mentioned in my post about tips for coping with redundancy, it is possible to insure yourself against losing your job (through redundancy, not just performing badly or doing something silly to get yourself the sack), using something called an Accident, Sickness and Unemployment (ASU) policy.

An ASU policy will pay out a monthly sum to cover your mortgage and other living expenses for a certain period of time (usually 12 or 24 months).

One caveat though was that if there was any suggestion that redundancy was on the cards when you took the policy out, then it would become invalid.

I’ve been talking about this today with some friends, and they were wondering how exactly an insurance company would work this out – is it based on whether other people have been made redundant recently, suggesting that others, including you as the insured are also likely to get the chop, and how would they know this? Are there any timescales involved?

There’s nothing particularly sinister about wanting to know this, I just didn’t know the answer, and I think it would be quite important to point this out to someone who was thinking of taking out an ASU policy, as it might make them decide it wasn’t worth doing if there had already been other redundancies in your company.

It might be that a question on the application form asks “have their been any redundancies in your company in the last 6 months”, or something similar, to which you’d have to answer honestly – perhaps it’s as simple as that, I don’t know? I guess it could be similar to the health questions you get in life insurance applications – if you don’t answer truthfully you could find your policy doesn’t pay out on a claim because of non-disclosure.

Are there any insurance experts out there that can answer this? Let us know the answer in the comments below.

Creative Commons License photo credit: alexanderdrachmann

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