With jobs at stake due to global recession, how job-loss insurance helps in staying afloat

With the US and some European countries on the brink of recession, many multinational companies have started laying off their staff.

As losing a job creates immense hardship for a laid off person due to discontinuation of regular income, one should take appropriate measures to minimize the impact of job loss.

Such preventive measures include creating an emergency fund by setting aside money equivalent to 6 months salary in liquid investment instruments and taking insurance cover.

Apart from health and life insurances, job-loss insurance would be one of the useful options to stay afloat during the difficult period after retrenchment.

“With cold economic winds blowing across geographies and industries, pay cuts, furloughing and layoffs are the new scares among Corporate employees,” said Naveen Kumar Midha, Executive Director – Health & Benefits, Global Insurance Brokers Pvt Ltd.

“Corporate India does have limited job-loss protection in the form of insurance add-ons to standard insurance coverages like critical illness, personal accident, home insurance, etc,” he added.

“As of now, there is no stand-alone insured employment cover by any of the carriers,” Midha said.

“Such job-loss insurances typically cover retrenchment due to any M&A activity but exclude payouts on account of employment termination due to resignation, retirement, disciplinary action, poor performance, health conditions, etc. Moreover, such policies come with waiting periods and payouts capped at a percentage of income, ”he further said.

Midha lists the following Does and Don’ts while buying and availing oneself of such a plan:

  • Check for the absolute value of benefit relative to the premium paid and the probability of job loss. As a thumb rule, a premium in excess of 5% of the total cover is considered overpriced.
  • Check whether the Policy would still pay in case the severance benefit is being paid.
  • Apart from the amount, evaluate the payout period to determine whether it would be long enough to bail one out during the unemployment period.
  • Check whether the claim would still be payable if the employer gives a notice before termination
  • Ensure that there is written proof of retrenchment.

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