Best redundancy insurance plans in New Zealand

What is redundancy insurance?

Redundancy insurance (unemployment cover) provides temporary, short-term financial protection specifically designed to support you if you lose your job through no fault of your own (involuntary or forced redundancy). 

Involuntary redundancy occurs when an employer eliminates a position due to restructuring, downsizing, or business closure. Being made redundant means your role is no longer required within the organisation, resulting in the termination of your employment, unless you’re offered another position in the company.

Redundancy (unemployment) insurance advantages

Redundancy insurance provides several advantages that can help maintain your financial stability after an unexpected job loss. Let's explore these benefits in detail:

• Enhanced financial support: If you’re made redundant, there’s no guarantee that your employer will provide compensation, especially if this is not stated in your job contract. Benefits from Jobseeker Support and other government programmes are also temporary, have their limits, and are likely not enough to manage your current lifestyle, especially if you have hefty financial commitments.
  
  For instance, Jobseeker Support can only provide a weekly benefit of $353.46 if you’re a single 25-year-old or older. If you’re married/in a civil union or a de facto couple with children, you may be entitled to a weekly benefit of up to $635.10, although the exact amount will also depend on how much your partner earns. Redundancy insurance can bridge the gap between the payments you receive and your expenses.

• Maintain living expenses: With redundancy insurance, you can keep up your standard of living, and continue paying for utilities, groceries, and other necessities, while focusing on your next career move.
• Breathing space for professional growth: With your essential expenses covered, you can dedicate your full attention to finding another role or investing in upskilling. This could include pursuing additional qualifications or exploring a career change, without immediate financial pressure.
• Job search support: You can use your redundancy insurance benefit to cover costs associated with job hunting, including transportation and meals during the interview process and before you receive your first paycheck, professional attire, work equipment, training, career coaching, or networking event fees.
• Negotiating power: Having financial security means you're not forced to accept the first job offer that comes along. You can take the time to research potential employers, prepare thoroughly for interviews, and carefully evaluate offers. This can lead to better employment outcomes and potentially higher salaries in your next role.
• Protect your retirement savings: Avoid the need to make early withdrawals from your KiwiSaver due to significant financial hardship. Early withdrawals can impact your retirement nest egg, not just through the amount withdrawn but also through lost compound returns over time.

Terms and benefits of redundancy insurance 

To understand how unemployment insurance works, here’s some info about some of the benefits, features, and terms that can influence your plan.

• Benefit amount: Refers to the amount your insurer will pay if you lodge a claim due to involuntary redundancy. The specific value depends on your policy, with some insurers providing up to $4,000 per month.
• Benefit period: Defines how long you’ll receive monthly payments while you are involuntarily unemployed. Benefits continue until you find new employment, or for a set period, typically up to six months.  Additionally, most policies have an age limit, usually around 65, at which point it expires. 
• Waiting period: Refers to the required length of unemployment before you can submit a claim due to redundancy. This period typically lasts four weeks, or up until the time your employer could provide an income, such as a redundancy payment (with a maximum of 13 weeks).
• No-claim period: Refers to the initial period after purchasing a policy during which you cannot submit a claim. Most insurers require that you hold the policy for at least six months before becoming eligible to claim redundancy insurance.

What's not covered?

Redundancy insurance policies have specific exclusions. The situations below are not usually covered. Refer to your policy document or talk to an adviser to better understand excluded circumstances.

• Voluntary redundancy or resignation, including cases where you:
  • Accept a voluntary redundancy package
  • Choose to leave your position
  • Retire from your role
  • Transfer to another company within the same group.
• Involvement in labour disputes, strikes, or industrial action, resulting in your redundancy
• Non-standard employment arrangements, such as:
  • Self-employment
  • Seasonal, temporary, or casual work
  • Fixed-term contract positions which expired or were not renewed.
• Pre-existing circumstances, including if you knew or ought to have known about the possibility of being made redundant when your cover started
• Other circumstances
  • Redundancy within the first 180 days of employment or six months since the risk commencement date
  • You haven’t been earning an income for six months immediately before the redundancy
  • You’re completing home detention or are in prison
  • You become redundant while outside New Zealand and do not return within 28 days
  • You or a relative is in a position controlling the employer, such as being its owner, director, or shareholder.

When will you stop receiving your monthly redundancy cover benefit?

Your monthly redundancy insurance benefits will cease under the following circumstances:

• Starting paid work
• Failure to put in reasonable effort to find work, such as but not limited to:
  • Failing to actively seek new employment
  • Not registering with employment agencies
  • Unable to provide proof of job search activities.
• Policy limitations:
  • Reaching the maximum benefit period
  • Policy expiration or cancellation
  • Breach of policy conditions
  • Leaving New Zealand for 28 consecutive days or longer.

How can you get redundancy insurance?

Redundancy insurance is available as an optional add-on to your income protection and mortgage protection insurance policies.

If you need help deciding whether it makes good sense to add redundancy cover to your mortgage and income protection plans, schedule a free consult with a Policywise adviser. Through Policywise, you can access expert guidance to structure a financial protection plan that:

• Aligns with your financial goals, obligations, and lifestyle needs
• Provides appropriate cover for your circumstances
• Offers competitive premiums and terms
• Ensures comprehensive protection against major life events that could impact your earning capacity.

Redundancy insurance alternatives

While redundancy insurance provides valuable protection, you can implement several other practical strategies to safeguard your financial security during periods of unemployment.

Build an emergency fund

Creating a robust emergency fund is one of the most effective alternatives to redundancy insurance. Consider:

• Setting aside 3-6 months of living expenses in an easily accessible savings account
• Regularly contributing to your emergency fund, even if starting with small amounts
• Keeping this fund separate from your day-to-day banking accounts
• Maintaining the discipline of not using these funds for non-emergencies.

Focus on critical risk protection

Prioritise getting insurance for more severe financial risks, such as:

• Mortgage insurance or income protection: provides monthly payments if you can’t work due to a critical illness or injury, even those covered by ACC
• Trauma insurance: provides a lump sum payment in the event you suffer from a critical illness, like cancer or a stroke
• Total permanent disability (TPD) insurance: provides a lump sum benefit if a total and permanent disability prevents you from going back to your occupation
• Health insurance: provides financial cover for private medical treatments, so you don’t have to worry about incurring high bills if you opt to go private to skip long waiting times in the public health system. Several comprehensive plans also cover the cost of non-Pharmac-funded drugs and their administration.
• Life insurance: pays out a lump sum benefit if you pass away or are diagnosed with a terminal illness and given a year or less to live.

Career development strategies

Investing in your employability can provide long-term security:

• Continuously update your skills through professional development courses
• Obtain relevant industry certifications
• Develop multiple income streams or transferable skills
• Build a strong professional network.

Financial management

Strengthen your financial position through prudent management:

• Review and reduce unnecessary expenses
• Create a lean budget focusing on essential costs
• Build multiple income streams where possible.

Does income protection insurance cover redundancy in NZ?

Standard income protection insurance plans in New Zealand do not cover redundancy. However, some insurers offer optional add-ons for redundancy cover. Policies with this feature provide short-term financial support while you seek new employment.

How much does redundancy insurance cost in NZ, and how can I get lower premiums?

The cost of redundancy insurance varies depending on your occupation, income, and the level of cover required. To reduce the cost of your premium, consider choosing a longer waiting period or a lower cover amount.  

Can you get redundancy insurance if you're self-employed? 

Redundancy insurance is generally designed for salaried employees and may not be available to self-employed individuals. However, mortgage or income protection policies often include financial provisions in the event of specific business disruptions or unforeseen circumstances. Discuss your self-employed insurance options with a Policywise adviser who can help you identify suitable cover.

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Mortgage insurance vs income protection

Trauma insurance vs income protection insurance

Self-employed personal insurance

Policywise: Your trusted insurance adviser

Redundancy is a common reality that can upend your life, making it challenging to meet essential expenses such as rent, mortgage repayments, and daily living costs.

Be prepared by adopting proactive and protective financial strategies, such as building an emergency savings fund and considering redundancy insurance. It’s easier to find the best redundancy cover with help from your trusted insurance broker, Policywise.

Policywise is a 100% free service which tells you which health, life, and disability insurance provider best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers, and a simple summary clearly recommending which insurer is best for your situation.

Not all insurance policies are the same. Policywise can help you sort out the duds, avoid the lemons, understand the fine print and exclusions, and get the right insurance for you and your family.

We make the important decision of where to buy your insurance super easy. We’ll answer your questions, provide experienced advice and quotes, and manage all the back and forth throughout the application process. Taking out your cover through us means you'll have our lifetime support and claims advocacy, and we'll help you negotiate a positive outcome at claim time. We can also take care of lodging any claims on your behalf and back you up if the going gets tough.

Check out the reviews on our homepage for how other New Zealanders have found our service because now is the time to get your redundancy insurance sorted. Give your family or someone you love the most outstanding financial support possible. Book a 5-minute callback with Policywise today; our service is fast and free.

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