Will Job Loss Insurance Help You If You Get Laid Off?

By Saroni Chakravarti | May 4, 2020

The COVID-19 crisis has spelled doom for our jobs. But will getting a job loss insurance help? Let’s find out.

Lost Your Job? Fret Not! Follow These Steps

The writing is on the wall – it will take us another couple of years at least to recover from the COVID-19 crisis and the doom it has spelled for our jobs. In fact, until a vaccine develops and is made commercially available, which realistically speaking will take at least a year, we’re far from the end of this crisis.

One of the biggest fallouts of the COVID-19 crisis is that it has rendered millions of people jobless, furloughed or left with sizeable paycuts across the globe. It hit the travel and hospitality industry first, but slowly it spread its tentacles to other sectors and industries. Getting laid off is no longer a distant possibility and if it’s a question weighing heavily on your mind, believe me – you’re not alone. Many are considering signing up for a job loss insurance policy. But will it help? Let’s take a look.

Standalone Job Loss Covers

If you’re considering getting a job loss cover, you need to know that general insurers do not offer standalone job loss insurance plans. They usually come as an add-on with other policies that cover larger risks like critical illness, personal accident cover, home insurance etc. At the moment, only the Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) offers a standalone job loss cover, which is the only traditional unemployment insurance in India supported by ESIC on behalf of the government. The government is also looking at making unemployment benefits available under the Atal Beema Vyakti Kalyan Yojana (ABVKY) for those who have subscribed to the Employees’ State Insurance Corporation (ESIC).

Exclusions

Here’s a list of exclusions that will make your claim ineligible:
  1. Job loss due to reasons other than retrenchment like a merger or acquisition.
  2. Unemployment of a self-employed person.
  3. Unemployment due to voluntary resignation or early retirement.
  4. Unemployment during probation period.
  5. Any termination, suspension or retrenchment from employment due to poor performance of the insured.
  6. Job loss due to pre-existing diseases and health conditions.
  7. Job loss due to disciplinary action.

Coverage

Job loss insurance covers pay only the three biggest EMIs that you have running and it is usually capped at 50 percent of your income.

When It Kicks In

There is a three-month long waiting period before the cover comes into effect. You can make the claim only once during the term.

Some Things You Should Check With The Insurer

Even if you meet the claim requirements, there are some things you need to check with the insurer before getting the cover just to avoid any last-minute surprises:
  1. If the employer offers severance pay, will you still be eligible for the claim?
  2. If the employer gives a termination notice as per your contract, will you get the claim?
  3. What happens if you have been fired but do not have a written document to prove it?

Proof Of Retrenchment

Written proof of retrenchment is a must for the insurer to ascertain the eligibility of your claim. The job loss policy will come into effect only if it has been sufficiently established that the job loss is owing to conditions spelled out in the policy and is not because of a voluntary resignation by the insured. This is why documentation citing the reasons and circumstances of job termination is crucial.

Alternative To Job Loss Insurance

Job loss insurance has limited scope and coverage. Given this, the best alternative to it is to stick to the tried-and-tested method of planning and investing for a secure future. Creating an emergency fund with 3 to 6 times your monthly income is a good place to start. You will be able to safely fall back on this option and continue to meet your necessary expenses when the going gets tough. Short-term investments with flexible liquidity will also help you tide over difficult times. Your investments are your safest bet when it comes to protecting your financial future against job loss.
If you need help with investments, click the link below to start exploring!
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Category: Financial Planning Insurance Money Management Savings UCN
Saroni Chakravarti

About Saroni Chakravarti

Saroni loves all things quaint and old world- be it art, music or cinema. She has a special knack for spotting the weirdest traits in people and can't for the life of her understand why she attracts the worst co-passengers. Despite her cynical exterior, she still hopes for a world that will be free from discrimination and cruelty. When she's not spending her day commuting, she can be found watching funny videos, reading, and sending out needy vibes to strays around her.

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