Income protection and redundancy: what to know
Redundancy and income protection
No. Income protection does not pay out because you are made redundant. It pays a monthly income when illness or injury prevents you from working, after a deferred period. Losing your job while you are healthy is not a claim under an income protection policy.
That said, redundancy and income protection interact in ways that matter: an existing claim can sometimes continue, a personal policy can usually be kept, and some separate products are designed for unemployment. This guide explains each, using official sources. It is information, not advice.
Why income protection does not cover redundancy
Income protection is designed around incapacity — whether you meet the policy definition of being unable to work because of illness or injury. The definition might refer to your own occupation, a suited occupation, or everyday activities, and the claim depends on medical evidence. Redundancy is an employment event, not an incapacity event, so it falls outside the cover.
Ombudsman decisions about income protection consistently turn on incapacity: whether the definition was met, [8] and whether the deferred period had been completed or an exclusion applied. [6]
| Situation | Income protection pays? | Notes |
|---|---|---|
| Illness or injury stops you working | Yes, after the deferred period | Subject to the definition of incapacity and exclusions |
| Made redundant while healthy | No | Not an incapacity event |
| Already claiming when made redundant | Often continues | If you still meet the definition — check the wording |
| Made redundant, then fall ill | Depends on the policy | Some policies change the definition or benefit for people not in work |
| Resign or dismissed while healthy | No | Not an incapacity event |
If you are ill when you are made redundant
If you are already receiving income protection benefit when your job ends, many policies continue to pay as long as you still meet the definition of incapacity, because the claim was triggered by illness. If you are within the deferred period when redundancy happens, the position depends on the policy wording; some policies continue the assessment, others change how incapacity is measured once you are not in work.
Some policies also apply a different definition, or limit the benefit, if you become ill while unemployed, because there is no current job to measure “own occupation” against. Read the section on people who are not working, and ask the insurer in writing if it is unclear.
Answer every application and claim question accurately. The Consumer Insurance (Disclosure and Representations) Act 2012 sets out what an insurer can do if information given when you applied was inaccurate. [7]
Unemployment cover and payment protection
Insurance that pays if you lose your job does exist, but it is a separate product, often called unemployment cover or short-term income protection with an unemployment option. Payment protection linked to a mortgage or loan is another version. These products typically pay for a limited period, often up to 12 months per claim, and have exclusions such as an initial period after the policy starts and situations where you knew redundancy was likely.
Because these products vary so much, read the key features carefully: when the cover starts, what counts as involuntary unemployment, how long it pays and whether it covers self-employment. Do not assume an income protection policy includes unemployment cover unless the documents say so.
What you are entitled to if you are made redundant
If you are an employee with two years’ service or more, you are normally entitled to statutory redundancy pay. It is half a week’s pay for each full year you were under 22, one week’s pay for each full year aged 22 to 40, and one and a half weeks’ pay for each full year aged 41 or older, with service capped at 20 years. [1] For redundancies on or after 6 April 2026, weekly pay is capped at £751 and the maximum statutory redundancy pay is £22,530. [1] Your contract may give more.
You may also be able to claim New Style Jobseeker’s Allowance, which is based on National Insurance contributions, [2] and Universal Credit, which is means-tested. [3]
| Age during each full year of service | Entitlement per year |
|---|---|
| Under 22 | Half a week’s pay |
| 22 to 40 | One week’s pay |
| 41 or older | One and a half weeks’ pay |
| Maximum service counted | 20 years |
| Weekly pay cap (from 6 April 2026) | £751 |
If you are ill rather than unemployed, the relevant state support is Statutory Sick Pay while employed — £123.25 a week for up to 28 weeks [4] — and then possibly Employment and Support Allowance. [5]
What happens to your policy after redundancy
A personal income protection policy is yours, not your employer’s, so it normally continues after redundancy as long as you keep paying the premiums. Before stopping payments to save money, consider that restarting cover later means new underwriting based on your health at that time.
If you take a new job, check whether your policy needs updating: a change of occupation or income can affect the benefit you can claim. If your income falls, some policies limit the benefit to a share of your earnings at the time of claim, so tell your insurer about significant changes.
See what income protection is and how it fits with sick pay and benefits.
Group income protection and redundancy
Group income protection provided by your employer usually ends when your employment ends. If you were already claiming under a group policy, the benefit may continue under the scheme’s rules even after you leave; the Ombudsman’s published complaints data includes disputes about group protection. [9] Some group policies offer a “continuation option” that lets you take out an individual policy without fresh medical questions within a short window after leaving. Ask your HR team or the scheme administrator before your last day.
Our guide to group income protection explains how employer schemes work.
Planning for both risks
Because illness and job loss are different risks, people who worry about both often look at them separately. Income protection deals with the risk that illness or injury stops you earning, which can last months or years. Redundancy is usually a shorter, one-off disruption, for which statutory and contractual redundancy pay, savings and state support are the main resources. Thinking about each risk on its own terms helps avoid buying a product that does not fit the gap you are worried about.
A practical first step is to write down what you would have in each situation. For redundancy: your likely statutory or contractual redundancy pay, any notice pay, your savings and whether you might qualify for New Style Jobseeker’s Allowance or Universal Credit. For illness: your employer’s sick pay, Statutory Sick Pay, any group income protection, savings and any personal policy. The gaps that appear in each list are the ones worth thinking about.
If you hold a personal income protection policy and are worried about affording it after redundancy, ask the insurer about options before stopping payments. Reducing the monthly benefit or lengthening the deferred period can lower the premium while keeping some cover in place. Cancelling and reapplying later means fresh medical questions, and any change in your health since you first applied could make new cover more expensive or narrower.
Finally, keep your paperwork together. If you are made redundant while unwell, having your policy schedule, recent medical evidence, your employer’s sick pay records and your redundancy letter in one place makes it far easier for an insurer to assess whether an existing claim should continue. Write down the dates on which you stopped work through illness and on which your employment ended, because the order of events can matter.
Looking at cover with PremierPMI
PremierPMI is a specialist private medical insurance broker and the publisher of The Health Guide. If you want to talk through what this means for your own cover, you can start there.
Or, if you would rather start here, send an enquiry and PremierPMI will contact you.
Common questions
Does income protection pay if I am made redundant?
Will my income protection claim stop if I lose my job?
Can I keep my income protection policy after redundancy?
Is there insurance that pays out on redundancy?
How much statutory redundancy pay will I get?
What if I fall ill after being made redundant?
Sources and methodology
- [1] GOV.UK. “Redundancy: your rights — redundancy pay”. View source(opens in a new tab)Primary source
- [2] GOV.UK. “Jobseeker’s Allowance (JSA)”. View source(opens in a new tab)Primary source
- [3] GOV.UK. “Universal Credit”. View source(opens in a new tab)Primary source
- [4] GOV.UK. “Statutory Sick Pay (SSP)”. View source(opens in a new tab)Primary source
- [5] GOV.UK. “Employment and Support Allowance”. View source(opens in a new tab)Primary source
- [6] Financial Ombudsman Service. “Final decision DRN-4775950 (income protection claim — exclusion and deferred period)”. View source(opens in a new tab)Primary source
- [7] UK Parliament (legislation.gov.uk). “Consumer Insurance (Disclosure and Representations) Act 2012”. View source(opens in a new tab)Primary source
- [8] Financial Ombudsman Service. “Final decision DRN-5719011 (income protection claim — own occupation definition)”. View source(opens in a new tab)Primary source
- [9] Financial Ombudsman Service. “Annual complaints data and insight 2024/25”. View source(opens in a new tab)Primary source
We cite primary sources wherever possible. Read about our sourcing methodology.
Dior Teshayev
Health Insurance Editor, PremierPMI
- Health insurance editor
- Insurer product and literature research
Dior works alongside senior advisers to research and refine content about private medical insurance, producing articles, guides and updates that reflect the latest market and product changes. He tracks market trends, reviews insurer literature and prepares plain-English summaries for the advisory team.
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Stuart Hendy
PMI Expert and Head of Publishing, PremierPMI
- 20 years in UK private medical insurance
- Underwriting and corporate placement specialist
Stuart brings over 20 years of experience advising on UK private medical insurance. He is a key member of the private medical insurance team and Head of the Publishing Team, gathering detailed client requirements, liaising with insurers on tailored quotes, and running training on insurer product changes and underwriting nuance.
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