Redundancy Insurance FAQ

  • Redundancy insurance pays a monthly benefit for a set period of time if you lose your job through involuntarily or forced redundancy. It's designed to bridge the financial gap between losing your job and finding new employment.

    Unlike income protection insurance (which covers illness and injury), redundancy insurance specifically covers unemployment caused by genuine job loss. In New Zealand, there's no government unemployment benefit equivalent to the level most working Kiwis are used to earning. Work and Income NZ's Jobseeker Support pays a relatively modest amount so redundancy insurance provides meaningful short-term financial support during the job search.

    Redundancy cover is available as a standalone product or as an add-on to mortgage protection or income protection insurance.

  • Redundancy insurance works by paying a monthly benefit for a set period up to 6 months after you've been made redundant and have served a qualifying stand-down period (the period after you take out the policy in which you cannot claim; for most insurers this is at least 6 months).

    Here's how it typically works:

    1. You're made redundant (your role is disestablished)

    2. You serve a stand-down or waiting period (often 30–60 days after redundancy)

    3. Monthly benefit payments begin and continue for the agreed benefit period

    4. Payments stop once you return to employment or reach the end of the benefit period

    The monthly benefit amount paid will depend on your policy, most insurers will pay up to $4000 per month for redundancy cover. 

    Key requirement: the redundancy must be involuntary. If you resign, accept voluntary redundancy, are dismissed for cause, or are self-employed, you generally won't qualify for a claim.

  • Redundancy insurance in New Zealand is generally one of the more affordable types of cover. Like  with all personal insurances, the amount it costs varies greatly and depends on factors such as: 

    - The monthly benefit amount you want covered 

    - The length of the benefit period (3 months vs 6 months)

    - Whether it's a standalone policy or an add-on to another product

    Because redundancy insurance covers a shorter benefit period than income protection, premiums are generally lower. However, it also covers a narrower risk, purely job loss rather than illness or injury.

  • Redundancy insurance is worth considering if your household depends heavily on your income and you'd face real financial hardship if you lost your job unexpectedly.

    Ask yourself: if I were made redundant tomorrow, how long could I maintain my current financial commitments without income? If the answer is less than 3 months, redundancy insurance may offer a meaningful safety net.

    It's particularly relevant if:

    - You have a mortgage and relatively limited savings

    - You work in an industry prone to restructuring or economic downturns

    - You have dependants relying on your income

    - Your partner's income alone wouldn't cover your household expenses

    - You're in a specialised role where it might take months to find comparable work

    It's less critical if you have substantial emergency savings, low financial obligations, or work in a market where re-employment would be quick and easy.

  • Redundancy insurance covers involuntary job loss. This means situations where your employer genuinely disestablishes your role and makes you redundant through no fault of your own. It pays a monthly benefit for a defined period to help you meet your financial commitments while you look for new work.

    Typically covered:

    - Genuine involuntary redundancy where your position is disestablished

    - Restructuring that eliminates your role

    - Business closure or significant downsizing

    Typically NOT covered:

    - Voluntary resignation

    - Accepting voluntary redundancy or redundancy packages

    - Dismissal for misconduct or performance reasons

    - Self-employment or contracting income ceasing

    - Seasonal or contract roles ending as expected

    - Redundancy within a stand-down period after taking out the policy

    - Being a business owner whose business stops trading

    - Knowing prior to your insurance application about your future redundancy

    The distinction between voluntary and involuntary redundancy matters significantly. If you accept a voluntary redundancy package offered by your employer, most policies will not pay out. Even if the decision felt financially forced.

  • Generally no. Most NZ redundancy insurance policies specifically exclude voluntary redundancy. If you accept a redundancy package that was offered rather than imposed, insurers typically treat this as a voluntary decision and will decline the claim.

    In addition to this, if you knew about your potential redundancy prior to completing the insurance application, you would not be eligible to receive redundancy insurance.

  • Most NZ redundancy insurance policies pay out for a maximum of 3 to 6 months per claim. This reflects the typical length of a job search for most roles in the New Zealand market.

    Benefit periods of 3–6 months are generally sufficient for most Kiwis to find new employment, particularly in lower unemployment environments. However, for senior, specialised, or highly paid roles where the right opportunity may take longer to appear, 6 months is the safer choice.

    If you anticipate a longer gap between roles in your industry due to specialisation, age, or market conditions, pairing redundancy insurance with strong savings reserves or income protection can provide more comprehensive cover.

  • The waiting period (also called a stand-down period) for redundancy insurance is typically 30 to 60 days after you are made redundant. This means payments don't begin immediately upon job loss, you need to have been unemployed for a minimum period before the benefit kicks in.

    There's also a qualification period when you first take out the policy. Most NZ redundancy insurance policies require you to have held the cover for a minimum period (often 3–6 months) before you can make a claim. This prevents people from taking out the insurance only once they hear their job is at risk.

    This qualification period means you need to take out redundancy insurance while your employment is secure and not when you already have reason to believe a redundancy is coming. If you wait until restructuring is underway at your workplace, you'll likely find yourself outside the eligibility window.

  • Generally no, standard redundancy insurance in New Zealand is not available to self-employed people or business owners because there is no employer who can make you redundant. Redundancy insurance covers involuntary job loss imposed by an employer.

    If your business income ceases because you choose to wind up the business, lose clients, or face a downturn, that is not covered by redundancy insurance.

    If you're a sole director of your own company and draw a salary, some policies may consider your situation, but this varies by insurer and the specific structure of your business. Elan can advise on whether you meet any insurer's eligibility criteria.

  • For most employed New Zealanders with a mortgage and limited financial reserves, redundancy insurance offers meaningful protection at a modest cost. The key question is whether you could meet your financial commitments for 3–6 months on savings alone if you lost your job.

    New Zealand's Jobseeker Support benefit (from Work and Income) is a relatively modest safety net. This support only offers ~$300 to $500 per week depending on your situation. Another thing to keep in mind is your partner’s income is considered when determining eligibility. Depending on your partner's income, this may put you over the income threshold to receive any support. 

    Redundancy insurance is particularly good value for:

    - People in industries prone to restructuring or economic volatility

    - Homeowners with limited savings buffers

    - Single-income households

    - People in specialised roles where re-employment may take several months

  • Redundancy insurance covers job loss from involuntary redundancy. Income protection covers inability to work due to illness or injury. They protect against completely different risks and are complementary products.

    The most comprehensive protection combines both income protection for health-related income loss, and redundancy insurance for employment-related income loss.

    Some income protection policies offer an optional redundancy rider as an add-on, which can be a cost-effective way to cover both risks under one policy. At Elan, we can compare standalone versus add-on redundancy options across the NZ providers we work with.

  • Redundancy insurance has some important exclusions that are worth understanding before you take out a policy.

    Knowing about a potential future redundancy prior to your insurance application.

    Voluntary actions: Voluntary resignation, accepting voluntary redundancy, or any job loss you chose rather than had imposed on you.

    Cause-related dismissal: Being dismissed for misconduct, performance issues, or breach of contract.

    Self-employment and contracting: Income loss from self-employment ceasing or contract roles ending as planned.

    Pre-existing employment situations: Claims made during a stand-down period after taking out the policy, or if you were already aware of a pending redundancy.

    Seasonal or fixed-term roles: Contracts ending as scheduled are not considered redundancy.

    Business ownership: If you own the business and decide to close it, stop trading, or restructure your own role.

  • You can apply for redundancy insurance at any point in your employment, but most policies include a minimum qualifying period before you can claim, typically 3 to 6 months from the date the policy starts.

    This means if you take out redundancy insurance and are made redundant within the first few months of the policy, you'll likely be outside the qualifying window and unable to claim.

    Additionally, some policies require you to have been in your current role for a minimum period at the time of the redundancy. If you're very new to a role, it's worth checking the specific policy requirements before applying.

    The qualifying period is designed to prevent people from taking out cover only when they're already at risk. The right time to get redundancy insurance is when your employment is stable, not when you already have reason to suspect a restructure is coming.

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