Best Redundancy Insurance in New Zealand and how it works
- By Willi Olsen
- Updated
Redundancy insurance pays up to $4,000 monthly for up to six months if you are made redundant.
There’s a 6-month waiting period from when you start the policy – if you’re made redundant during this time, you won’t be covered. Once eligible, benefit payments begin one month after the 6-month waiting period.
Redundancy Insurance is an optional extra benefit that can be added to income or mortgage protection insurance.
Many mistakenly believe that by getting income protection insurance, they’re automatically covered for involuntary redundancy (i.e. dismissed from employment through no fault of their own).
That is not the case.
Unfortunately, job security seems to be a thing of the past, and nobody is indifferent to the threat of redundancy. In addition, many businesses in New Zealand are having to downsize.
So, can you insure against redundancies?
What is Redundancy Insurance?
Redundancy cover, often called unemployment insurance, provides extra protection in case you’re made involuntarily redundant.
Redundancy insurance is designed to help you financially in the short term if you are laid off from your work. It pays you a monthly payment of up to $4,000 to month to help you keep up with bills and everyday living expenses while you look for a new job.
To qualify for the benefits of the policy, it must have been in effect for at least 6 months before being made redundant. If your claim is successful, it will usually come with the following:
- Benefit payout is maximum $4,000 per month
- Pays for maximum 6 months,
- Stand down period: You must have had the policy for minimum 6-month,
- after a 30-day waiting period that begins on the date you became redundant.
Many insurance companies and banks have stopped accepting new applications for redundancy cover since the outbreak and the New Zealand Government wage subsidy schemes were introduced.
Is Redundancy Insurance worth it
Yes, the Redundancy Insurance is worth it because it provides up to $24,000 over six months if you lose your job due to termination, redundancy, or dismissal. This coverage helps cover expenses and ease financial strain during unemployment.
How much does Redundancy Insurance cost?
The monthly payments for $4,000 per month redundancy insurance varies slightly, but is about $50-$60 per month or about $600 to $800 per year. You can claim up to $24,000. You do the calculation if it’s worth it for you.
How does Work and Income unemployment benefit compare?
Job Seeker benefits vary significantly by household composition. Singles aged 25+ qualify for $353.46 weekly until they reach $665.00 in gross income. Couples’ benefits increase substantially—those without children receive $601.46 weekly until they earn $1,020.00, while parents get $635.10 until they reach $1,068.00 in gross income. The parental supplement provides families with an additional $33.64 in weekly support and extends their earning threshold by $48.00.
The net weekly benefits are after tax at “M”.
| Category | Net Weekly Benefit | Gross Weekly Income Cut-out Point |
|---|---|---|
| Single, 18 - 19 years, at home | $262.30 | $535.00 |
| Single, 18 - 19 years, away from home | $307.87 | $600.00 |
| Single, 20 - 24 years | $307.87 | $600.00 |
| Single, 25+ years | $353.46 | $665.00 |
| Single, and receiving Domestic Purposes Benefit woman alone or Widows Benefit woman alone, before 15 July 2013 | $364.82 | $733.00 |
| Married, civil union or de facto couple (without children) | $601.46 | $1,020.00 |
| Married, civil union or de facto couple (with children) | $635.10 | $1,068.00 |
| Married, civil union or de facto couple, with non-qualified partner (with children) or Married, civil union or de facto couple, with partner on New Zealand Superannuation or Veterans Pension (with children) | $317.55 | $1,068.00 |
| Sole parent | $494.80 | $919.00 |
How to find the best Redundancy Insurance?
We can help you compare income protection and redundancy insurance from New Zealand’s top insurers.
If you want to learn more about Redundancy Insurance, call us at 0800259925.
Redundancy Insurance FAQ's
Does mortgage protection insurance cover redundancy?
By default, your mortgage protection insurance will not cover you if you lose your job. Mortgage protection often comes with various optional extras, including redundancy insurance. However, not every company that offers mortgage protection also allows customers to purchase this coverage.
How much are unemployment benefits per week?
If you’ve lost your job or can’t work at the moment, you may be able to get a JobSeeker benefit or some other financial help from Work and Income. It depends on your situation.
If you were receiving benefits from your redundancy insurance, your monthly benefits would amount up to a dollar figure (e.g. $4,000).
If you’re receiving unemployment benefits from Work and Income, the amount you’ll receive will depend on several different things, like which payment you’re eligible for (e.g. JobSeeker, Family Tax Credit, etc.) and your individual circumstances.
Work and Income can help you with unemployment benefits.
Does income protection cover redundancy NZ?
Unfortunately not, because income protection insurance is a disability insurance. Insurance when you lose your job is possible but must be selected as an add-on to the income protection policy.
Can I access my Kiwisaver if I'm made redundant?
You may access your Kiwisaver before retirement under specific circumstances, including severe financial hardship (which can happen after a job loss).
In this event, you must contact your KiwiSaver provider directly to apply for early release.
Remember any potential impacts that early withdrawal from your super can have on your future retirement lifestyle.