Do insurance companies offer standalone job loss insurance policy

Current times are turbulent, the disastrous effect of the novel corona virus 2019 has its deep-rooted effects which knows no international boundaries and geography. People of every age, religion, race and country has been profoundly affected by the same for worse.

With this new era of covid-19 looming over a large part of the globe, social distancing, wearing protective gear, work from home will be the new norms. In the long city wide and country wide lockdowns implemented by the respective governments economic activities have come to a halt for months.

In major developing and developed economies of China, United States, India, countries of Europe the impact of the virus and resulting lockdown is economically so severe that many of them are bound to enter into a deep recession.

In the view of the economic recession and as the companies are struggling to open up in full-fledged manner and generate revenue, they are unable to pay the salaries, in the recent past we have seen salary cuts, lay-offs and pink slips being distributed to employees taking unemployment to record highs in countries like Us.

In India also many companies are laying-off employees and reducing their costs to survive the worst phase in economy since the subprime mortgage crisis of 2008. Now the question which comes to the minds of many that what is loss of job insurance and how to get the policy in place.

Standalone loss of job insurance is not available in Indian insurance market as of now but it is available in developed insurance markets of UK, US and other countries. First, we will tell you the basic structure of such a policy and then we will provide you some ways by which we can get some sort of this coverage in India.

Unemployment insurance also known sometimes as redundancy cover is an income protection policy available to full time, part time and self-employed people. These insurance policies pay a certain percentage of your income usually 50% to 70% if you stop working due to accident, illness or termination of job due to redundancy. The policy continues to pay you monthly till you return to work which is helpful to pay your bills and takes care of household expenses till you have no salary.

The policy will deny coverage if you voluntarily quit your job or get fired due to an act of fraud or dishonesty. There is generally a waiting period of one to six months under the policy, there may also be a deferment period in which no pay out will be made after filing a claim. The policy is available in options like level cover and inflation linked cover, premium paying options could be like guaranteed and reviewable.

In level cover the premiums and pay outs are fixed and in inflation linked cover both premium and pay outs vary with inflation index. There is a short term and a long-term policy available the former being cheaper. The short-term policy will make the pay out for a shorter period i.e. 6 to 12 months whereas the long-term policy allows pay out till you retire or as long as 40 years.

In the United states there is a federal state unemployment insurance program providing benefits to unemployed workers for no fault of their own for a specified percentage of their income subject to maximum of specified weeks.

Unemployment insurance indemnifies an average of 300 US Dollars per week which is about one third of average wage in the United states and typically lasts for a period of about four months. Having such an organized loss of job insurance facilitated by the state itself is definitely going to help the large-scale unemployed population during these times of COVID 19 disaster.

Similarly, there are some unemployment compensation programs or insurance provided in many countries like Canada and Australia.

In India, in a personal accident policy there is a temporary total disablement (TTD) benefit generally, 1% of the sum insured or 5k/10k whichever is lower, which makes a per week payment for the period of confinement in which the insured is unable to gain any earning out of meaningful employment resulting from a bodily injury for a maximum of 104 weeks.

To claim the benefit a salaried person, need to provide a letter by the HR department that he was not drawing any salary for the period the benefit is claimed. Loss of job cover is available as a separate section or add on cover with personal accident or critical illness policy.

In some polices there is only a provision of paying loan or credit card EMI in case of loss of job or income, these policies are mainly sold by banks with loans or credit as a guarantee. We can see in the TTD benefit the cover is of very less value not sufficient to help the insured in case of crisis.

Also, in other policies the cover is in pretty restricted form and no policies in our country provides loss of job cover for redundancy and termination cases. Only Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) is a form of unemployment insurance in our country and that too not helps to cater to larger urban salaried and self-employed population.

It is high time the general insurers in India come up with a standalone loss of job and income protection type cover but for that the terms and pricing need to be carefully devised keeping the Indian context in mind.


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