Britain's six million public sector workers intent on unemployment insurance should buy soon or risk being excluded, experts insist.

Chancellor George Osborne announced in the Comprehensive Spending Review yesterday that over the next four years the Government will shed 490,000 jobs (see the Public sector jobs axe MSE News story).

Most policies with job loss cover exclude protection if redundancy is foreseeable at time of purchase. Some experts are suggesting the Chancellor's statement does not mark that point yet and cover is still available, yet others says it's key you ask your insurer in case they try to wriggle out of claims later on.

However, insurers may stop covering government workers at any point, and even if they still offer protection, they may hike costs as there is more chance they will have to pay claims.

If considering insurance, do your homework first as many policies are unsuitable, while some workers may not require cover (see the Loan Insurance and Financial Advice guides).

Window of time

Given the Chancellor has only just signalled almost half a million jobs will go across the board it is unlikely specific teams or sections within government departments have been told of potential losses.

Protection consultant Kevin Carr says: "Only once you know the writing is on the wall will you be excluded."

That said, insurers can be a tricky bunch. For instance, when British Airways cabin crew went on strike earlier this year, some didn't pay out if travel or insurance was bought after the announcement of a ballot but before strike dates were announced, even though passengers would not have known they were directly affected.

Carr says those worried about their jobs can usually purchase payment protection insurance (PPI) – to cover loan or credit card debt – or income protection. Carr says about half of income protection policies cover unemployment.

Matt Morris, from protection advisory firm Lifesearch, says he has spoken to numerous insurers over the past day who have all said they are still covering public sector workers. But he says this may change.

Morris stresses that even where insurers continue to cover government workers in future, they may increase premiums.

He adds: "It's not happened so far but I would expect providers to increase insurance costs for public sector workers."

One provider, British Insurance (BI), says it is still covering public sector workers for unemployment but stresses "every application will be dealt with on an individual basis".

It suggests applicants inform their chosen provider of any threat to their job so underwriters can make an assessment to save buying a worthless policy that doesn't pay out.

Is insurance worth it?

Morris says you may not need cover if you have sufficient savings or if you already have cover in place elsewhere.

Also consider that PPI policies, for example, only typically pay out for a year so weigh up the risk and the cost of the premium with any possible payout (see the Loan Insurance and Mortgage Protection guides).

Morris adds; "As always, check the small print and if you are worried or unsure, seek advice."

If you're set on getting cover, ensure you don't pay over the odds.

Banks, for example, typically overcharged consumers by £1.4 billion a year when selling PPI, according to the Competition Commission, though many have since stopped selling cover.

It is often far cheaper to buy PPI from an independent provider, such as British Insurance or Paymentcare.

Further reading/Key links

Need cover? Loan Insurance, Mortgage Protection, Financial Advice