Unemployment Insurance is There to Save You, But is it Worth it

Image by Niek Verlaan from Pixabay

With talks of a global recession looming over us, it’s a reasonable fear or worry to lose your job. However, a job loss insurance or supplemental unemployment insurance may protect you by paying a sum of money when you lose your job. 

Helping you to survive through the employment gap period, it may cover events like businesses laying off people due to closure, job elimination, or others that may again be covered for separation from employment. Do keep in mind though that the insurance does not provide a shield against voluntary resignation, retirement and if one is fired from the job.

On that note, there are many kinds of supplemental unemployment policies available that one may choose from:

  • Personal Supplemental Insurance Policy
  • Company Provided Supplemental Unemployment Insurance Benefits
  • Union Supplemental Insurance Coverage
  • Mortgage Unemployment Insurance
  • Payment Protection Insurance

Before You Jump In…  

Your fear might get the better of you, but to keep yourself on track here are factors to consider before signing up for another premium:

  • Does Not Cover Poor Performance

The benefits of such insurance can only be reaped if the insured is laid off for reasons except for poor performance. Also, the coverage is only for termination due to mergers and acquisitions of a company. A proof of retrenchment needs to be submitted in order to make the claim admissible.

  • Waiting Period

Most of these policies have a waiting period before one is eligible to receive benefits. This means that if you lose your job before that waiting period ends, you won’t be able to claim any benefits.

  • Capped Amount

The Benefits have limitations of collection periods and there is a cap on the amount to be disbursed on such claims. 

Ask before you enrol! These insurance policies are marketed in a way to attract the people so that they are compelled to buy the policy as if it is really a need. Don’t go ahead with the policy if you have saved up enough for contingencies or have enough liquid investments to keep you afloat until you find another job.

Confused? An IUCC could be the answer!

Alternatively, an Involuntary Unemployment Credit Card (IUCC) might help you ride through the transition period by delaying payments or minimising them when you get laid off unexpectedly.

The Bottom Line

A job loss insurance makes sense only if the business cycle of the economy is nearing the end of its maturity stage or there is a recession/job market is slow. Paying up a lump sum or periodical premiums for a policy which is not needed for the moment or even for short term is not worth the limitations it brings along with itself.

It is instead a much better idea to instead save up some cash, cut spendings and regularly invest small amounts in the stock market/maintain a balanced portfolio having various sectors from all asset classes.

Written by

Sourabh Jain

Last updated on

October 24th 2019, 9:54 am

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