News & Guides
⏱ 3 min read
📅 Updated Apr 2026
Does Income Protection Cover Redundancy? UK Guide 2026
Does income protection cover redundancy?Standard income protection insurance does not cover redundancy or voluntary unemployment. It covers loss of income due to illness or injury that prevents you from working. If you want cover for redundancy specifically, you need Accident, Sickness and Unemployment (ASU) insurance — a different product sold separately. Income protection = illness and injury only. For redundancy cover, you need ASU (Accident, Sickness and Unemployment) insurance. The two are different products. What does income protection actually cover?- Long-term illness — physical or mental health conditions that stop you working
- Injury — accidents that leave you unable to do your job
- Chronic conditions — ongoing health issues including cancer, back problems, stress and burnout
- It does NOT cover redundancy, resignation, or being dismissed
What is ASU insurance?Accident, Sickness and Unemployment (ASU) insurance pays a monthly benefit if you cannot work due to accident, illness, or involuntary redundancy. It is typically short-term cover — paying out for 12 to 24 months — versus income protection which can pay until retirement age. | Feature | Income Protection | ASU Insurance |
|---|
| Covers illness/injury | Yes | Yes | | Covers redundancy | No | Yes — involuntary only | | Benefit payment period | Until recovery or retirement | Typically 12 to 24 months | | Cost | Higher | Lower | | Underwriting | Full medical underwriting | Usually simpler | | Best for | Long-term illness protection | Short-term income bridge including redundancy |
Key ASU exclusions to watch for- Voluntary redundancy — ASU only covers involuntary redundancy; taking a voluntary package is excluded
- Self-employed workers — most ASU policies exclude self-employed people from the unemployment element
- Known redundancy risk — if your employer has already announced redundancies, insurers will not cover you
- Short-term contracts — workers on fixed-term contracts may be excluded from redundancy cover
- Waiting period — most ASU policies have a 60 to 90 day waiting period before claims can be made
How much does ASU insurance cost?ASU insurance typically costs 1 to 3% of your monthly benefit amount per month. For example, cover paying £1,500 per month might cost £15 to £45 per month. Premiums vary by age, occupation, and whether you include the unemployment element. Are there alternatives to ASU for redundancy protection?- Emergency fund — 3 to 6 months of expenses in easy-access savings is the most reliable buffer
- Statutory redundancy pay — you are entitled to statutory redundancy pay after 2 years service; calculate your entitlement at gov.uk
- Mortgage payment protection insurance (MPPI) — covers mortgage payments specifically if you lose your job
- Enhanced redundancy package — negotiating your contract terms is more reliable than insurance for higher earners
Verdict ASU is what you need for redundancy — not income protection If redundancy is your primary concern, ASU insurance is the right product. Income protection is for illness and injury. Many people buy both for comprehensive cover, but read the exclusions carefully before purchasing ASU. Frequently asked questionsWill income protection pay out if I am made redundant? No. Standard income protection does not pay out for redundancy. It only pays when illness or injury prevents you from working. You need ASU insurance for redundancy cover. Can self-employed people get redundancy insurance? Self-employed people cannot typically access the unemployment element of ASU insurance, as there is no employer to make them redundant. Income protection for illness and injury is still available and important for self-employed workers. How long does ASU insurance pay out? Most ASU policies pay for a maximum of 12 to 24 months per claim. This is designed as a bridge while you find new employment, not a long-term replacement income. Do I need to declare health conditions to get ASU insurance? ASU insurance involves lighter underwriting than full income protection, but you must still disclose pre-existing conditions. Failure to disclose accurately can invalidate a claim. |
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Chandraketu Tripathi
Finance Editor · Kaeltripton.com
Chandraketu (CK) Tripathi, founder and lead editor of Kael Tripton. 22 years in finance and marketing across 23 markets. Writes on UK personal finance, tax, mortgages, insurance, energy, and investing. Sources: HMRC, FCA, Ofgem, BoE, ONS.
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