Job Loss Insurance: After the big layoffs at TCS, job loss insurance is in the news. This insurance provides financial help for a few months when a job is lost. Know what job loss insurance is and how it works.
Job Loss Insurance: This year, Tata Consultancy Services (TCS) has decided to lay off about 12,200 employees. This has had the greatest impact on mid and senior level professionals. In such times, job loss insurance has emerged as an important option. Let us know what this insurance is, how it works and in what circumstances it helps.
What is Job Loss Insurance?
Job loss insurance is a kind of policy that provides financial assistance to a person in case of inadvertently losing a job. With this, you can bear the expenses of essential things like rent, loan EMI, bills, medical expenses until you get the next job.
Gurdeep Singh Batra of Bajaj Allianz General Insurance says that this insurance can be a good option for those who are worried about losing their job. Especially in sectors like IT, startups and factories where layoffs keep happening every day. Now it is not limited to recession or special circumstances.
How does it work?
In this insurance, usually a fixed amount is received every month for a fixed period. In many policies, up to Rs 10,000 can be received every month for three months, in some policies this amount also increases every month. In most cases, up to 70% of the salary can be received. Payment starts only when you are unemployed for a few days.
Giving an example, Batra said that the insured can get up to ₹ 10,000 every month for three months. This will depend on how many days he has been unemployed and what is the waiting period. In some policies, the benefit increases gradually, like ₹ 5,000 in the first month, ₹ 10,000 in the second and ₹ 15,000 in the third, so that people keep looking for a new job continuously.
How much premium is added?
The premium depends on your salary, job profile and the duration of the policy. If this insurance is taken through the group cover of a bank or office, it can be cheaper.
Who can take this insurance?
This insurance is available only to salaried employees of the formal sector (registered companies). You work in any company (MNC or startup), if that company comes in the regulated sector, then you are eligible.
Sajja Praveen Chaudhary of Policybazaar for Business says that whether someone is in a multinational company or a startup, if that company comes in the formal sector (i.e. registered and running as per the rules), then its employee can come under the purview of this insurance.
When does one get the benefit of insurance?
Job loss insurance usually comes in handy only when you have lost your job inadvertently, that is, neither did you want to leave, nor did you resign yourself.
If there has been a major change in the company such as reducing the number of employees, cost-cutting, or the company has to be closed due to any government order.
According to insurance expert Sajja Praveen Chaudhary, “Nowadays, if someone loses his job in a company due to AI i.e. Artificial Intelligence, then that too can come under the scope of insurance.”
What is not covered?
- If you run your own business or are already unemployed.
- If your job was on probation.
- If you took early retirement or resigned voluntarily.
- If you already had a serious illness and lost your job because of it.
- If you were fired due to reasons like poor performance, fraud or suspension.
When can a claim be rejected?
Insurance companies’ rules may vary. Generally, if you resign on your own, retire, or are fired for disciplinary reasons—then the claim may be rejected. Job loss due to an epidemic or pre-existing illness is also not covered, unless it is clearly stated in the policy.
Is this insurance beneficial?
Many companies pay 3 months’ salary after layoff and then give the option of ‘voluntary resignation’. This affects the insurance claim, because technically it is considered a job left by your will. Unless you can prove that you were fired, it is difficult to get a claim.
What are your other options?
Build an emergency fund: Save at least 6 months’ expenses separately.
Take insurance on loan: If you lose your job, the insurance company pays your EMI, which reduces financial pressure.
