Does income protection cover those who want to resign from their jobs?

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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, updated on November 25th, 2021       

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If you are looking to quit your job you are not the only one. There are 80% of working Australians who want to quit their jobs.The short end of it is that income protection doesn’t cover you if you resign from your job. However, if you are involuntarily made redundant you can get an income protection plan that will help you while you are on a hunt for a new job.

What is covered?

Income protection covers you for injuries or illnesses that you have sustained inside the workplace. It covers 75% of your regular income to supplement during your time of illness and injury. Some will cover you for expenses you incur during the rehabilitation process.

However, if you are made redundant the cover is treated differently. It’s important that you speak to your insurer to inquire if there are other policies you can use to protect you when you voluntarily quit your job.

Finding redundancy cover

To make it work for you an insurer can suggest that you take out two separate products under one policy. You can take out income protection from a life insurer and get cover from redundancy insurer from a general insurer so that you can have adequate insurance when you are unable to work. Some insurance companies offer involuntary unemployment cover which can pay you up to 85% of your income for up to three months in the event of involuntary redundancy.

Know the general requirements

There are various general insurance brands that offer redundancy cover, but as an applicant, you will have to be aware of the common requirements to make it less of a hassle. Some common requirements are:

  • You must prove that your redundancy was not caused by your own performance.
  • You should have at least been employed for a defined period of time before making a claim.
  • The policy must have been in force for a defined period.
  • During the period of redundancy, you must have no stream of income in the form of casual or part-time work.

It is essential that when you take out a policy you consider not only its unemployment feature but also any policy exclusion features. See if the features meet your needs before taking on a policy.

What to do before you quit your job

No matter how much you hate your current job, you need a backup plan before you decide to jump ship. It’s not just your resume that needs to be in order, but your finances need to allow you to have time to find a new job or else you could end up settling for a job that pays you less than what you should be earning.

You could open a savings account that will be able to assist you as you hunt for a new job. If you haven’t saved a considerable amount to subsidise all your expenses, you will have to stay a bit longer at your job until you are sorted.

You can also find a loan that has low interest rates to pay off big expenses such as your mortgage and fees. Having a game plan before you leave work will always work in your fa

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