In today’s uncertain economic climate, job security is a growing concern for many workers across Ireland. As layoffs and redundancies become more common in certain sectors, people are naturally looking for ways to safeguard their income. One solution that often comes up in conversations is income protection insurance. But does income protection actually cover redundancy in Ireland?
The short answer is no, standard income protection policies do not cover redundancy. However, there’s more to the story. Let’s explore the ins and outs of income protection insurance, what it covers, and what your options are if you’re worried about losing your job.
What Is Income Protection Insurance?
does income protection cover redundancy? Income protection insurance is designed to replace a portion of your income if you’re unable to work due to illness or injury. It provides financial support so you can cover essential living costs while you recover.
Key Features of Income Protection:
- Covers a percentage of your income (typically 75%) if you’re medically unable to work
- Pays out after a deferred period (usually 4, 8, 13, 26 or 52 weeks)
- Benefits are paid monthly, like a salary, until you return to work, reach retirement age, or the policy ends
- Can cover both employees and self-employed individuals
Income protection is popular among workers who want peace of mind knowing they’ll still have money coming in if a health issue prevents them from working.
Does Income Protection Cover Redundancy?
The Short Answer: No
Unfortunately, standard income protection policies in Ireland do not cover redundancy or job loss due to downsizing or economic factors. These policies are specifically tailored to support you if you cannot work because of illness or injury. Losing your job for business-related reasons is not considered a medical issue and therefore doesn’t trigger a payout.
Why Doesn’t Income Protection Cover Redundancy?
There are several reasons income protection policies exclude redundancy:
- Insurance Risk Scope: Insurers design income protection to cover personal health risks, not business or economic risks which are harder to measure and predict.
- Moral Hazard: If redundancy were covered, it might create incentives for people to claim benefits without genuine need.
- Cost and Complexity: Including redundancy cover would make premiums much more expensive and complicated to administer.
Essentially, income protection is a form of disability insurance, not unemployment insurance.
Are There Alternatives That Cover Redundancy?
While income protection doesn’t include redundancy cover, there are some alternatives you can explore if job security is your main concern.
1. Redundancy Insurance (Unemployment Cover)
Some insurers used to offer unemployment insurance or redundancy cover, which provides short-term payouts if you lose your job through no fault of your own. However, since the global financial crisis and especially post-COVID, these policies have become:
- Rare
- Expensive
- Limited in scope
Most major insurers in Ireland no longer offer standalone redundancy insurance due to the high risk involved. If you do find one, be sure to read the small print—these policies often come with exclusions, waiting periods, and strict eligibility rules.
2. Mortgage Payment Protection Insurance (MPPI)
Some mortgage protection policies include redundancy cover as part of the package. These are known as Mortgage Payment Protection Insurance (MPPI) and they help cover your mortgage repayments for a limited time (usually up to 12 months) if you lose your job.
Important things to note:
- You must be employed on a permanent basis
- You may need to have held the policy for at least 6 months
- Temporary, seasonal or self-employed workers may be excluded
3. Emergency Savings Fund
One of the most reliable ways to prepare for redundancy is by building an emergency savings fund. Financial planners generally recommend saving 3 to 6 months’ worth of living expenses in an accessible account.
4. Government Redundancy Payments
In Ireland, if you are made redundant and meet the eligibility criteria, you may be entitled to a statutory redundancy payment from your employer.
Key facts:
- You must have at least 2 years (104 weeks) of continuous service
- Payment is based on your age, length of service and weekly earnings
- It’s tax-free up to certain limits
Additionally, you may qualify for social welfare supports such as Jobseeker’s Benefit or Allowance, depending on your circumstances.
What Income Protection Does Cover in Ireland
It’s important to remember that income protection still plays a vital role in financial planning—just not for redundancy.
Covered Events Include:
- Long-term illness (e.g., cancer, heart disease, mental health conditions)
- Serious injuries that prevent work (e.g., back injuries, surgeries)
- Chronic conditions that require extended treatment and recovery
Income protection is especially important for people who do not have generous sick pay entitlements from their employer or are self-employed and lack social welfare benefits.
Pros and Cons of Income Protection Insurance
To help you decide whether income protection is right for you, here are the main advantages and drawbacks:
✅ Pros:
- Replaces up to 75% of your income if you’re medically unable to work
- Long-term support until recovery or retirement
- Tax relief available on premiums (up to 40% for higher earners)
- Peace of mind and financial stability during difficult times
❌ Cons:
- Does not cover redundancy or job loss
- Monthly premiums can be expensive, especially with short deferral periods
- Requires detailed medical underwriting
- You must continue paying premiums even if your job feels secure
Tips for Choosing the Right Income Protection Policy
If you’re considering taking out income protection insurance in Ireland, keep the following tips in mind:
- Compare providers: Not all policies are created equal—compare cover levels, waiting periods, and claim exclusions.
- Choose the right deferred period: A longer waiting period will lower your premium but may leave you short of cash early on.
- Assess your needs: If you have generous employer sick pay, you might need less coverage.
- Talk to a financial advisor: They can help you understand if income protection fits your personal situation and suggest alternatives if redundancy cover is your concern.
Final Thoughts: How to Protect Yourself from Redundancy
While income protection insurance doesn’t cover redundancy in Ireland, there are other proactive steps you can take to prepare for job loss:
- Create a budget and build an emergency fund
- Stay up-to-date with skills and training to boost employability
- Understand your rights under Irish employment law
- Review your mortgage and loan obligations
- Seek advice from a financial advisor or broker
If redundancy is a real concern in your industry, it’s better to prepare through a combination of savings, government entitlements, and risk management, rather than relying on a single insurance product.
In Summary
Here’s a quick recap of the key points:
- Income protection insurance in Ireland does NOT cover redundancy—it only covers income loss due to illness or injury.
- Redundancy insurance is rare, and hard to find, with limited options on the Irish market.
- You may be able to get short-term help from MPPI or government supports.
- The best defense against redundancy is a solid emergency fund, financial planning, and maintaining employability.
- Income protection remains a smart financial tool—but only for health-related income loss.
If you’re still unsure what type of protection suits your needs best, it’s wise to speak with a qualified insurance advisor or financial planner.
