Lost your job? Here's all you need to know about unemployment insurance

Unemployment is not only the talk of the town in the field of politics, but it is also becoming a hot topic for insurance companies, which provide insurance services to everyone, irrespective of the individual's economic background.

But, does unemployment insurance exist in India?

Let's first understand what exactly unemployment insurance is?

Typically, it is a cover that provides you with temporary financial assistance in the case of job loss due to any other reason than an individual's own fault. The circumstances under which an individual can avail of unemployment insurance benefits are the closure of a factory, the poor financial health of the enterprise, the closure of the divisional office, the acquisition and merger of the firm, etc.

For many decades, unemployment was a critical issue to solve in a developing country like India. After the pandemic, unemployment is at its peak as everyone is either getting ill or losing a job in the country. It impedes the country's economic growth and has an impact on GDP.

How do unemployment benefits work?

Just like health insurance, unemployment insurance also requires a waiting period of 30-90 days after buying insurance coverage. Also, individuals can avail of the benefit only up to a certain period of time. Generally, it is for 12 months. The insurance holder can get benefitted once in a lifetime of insurance cover.

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Steps taken by the government

When we talk about the government's plan to curb the battle of unemployment, Employee State Insurance has been working on two schemes already, namely, Rajiv Gandhi Shramik Kalyan Yojana (RGSKY), which started in 2005, and Atal Beemti Vyakti Kalyan Yojna (ABVKY) began in 2018.

Under such policies, the insurers will be allowed to get an allowance of up to 50% of their salary until they do not get another job for up to 2 years.

The only difference between the two policies is;

1. In the case of RGSKY, the insurer must have contributed for at least 5 years before the job loss.
2. In the case of ABVKY, the insurer must be insured for at least 2 years and contribute for at least 78 days immediately prior to the job loss.

How are private insurance players treating the situation?

However, other private players are also providing unemployment insurance as it is a need of the hour; who doesn't want to get benefits?

Although private players do not provide any direct insurance plan for protecting unemployment, they cover it as an add-on benefit in critical illness and personal accident insurance plans.

You have to choose an option of unemployment insurance while buying the insurance policy for critical illness or accident.

Some unemployment insurance in India

As we know, it is a new concept in India, so no stand-alone policy is available. However, there are few private insurance companies that provide add-on benefits. These are as follows;

• ICICI Lombard Secure Mind
• Royal Sundaram Safe Loan Shield
• HDFC Ergo Home Suraksha Plus

When you buy these policies, you can have the option to buy an unemployment insurance plan added on to them.

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What are the cases when you will not get any benefits from unemployment insurance schemes?

A few genuine exclusions will make you eligible to claim the benefits. These are as follows;

• Job loss occurred due to a voluntary resignation.
• If there is a situation of unemployment when an individual is self-employed.
• In the period of probation, termination, suspension, or unlawful activity
• Unemployment occurred due to some pre-existing diseases.

In the cases mentioned above, or any other case where unemployment occurred due to insurer fault only, the benefit will not be provided.

Factors to keep in mind while applying for unemployment insurance

Before applying for unemployment insurance, you need to remember a few things, as follows;

• Always read the document carefully, especially the terms and conditions of claiming a policy.
• Confirm with your insurance agent and employment category whether you are under the eligibility criteria for claiming unemployment coverage.
• Always go for the automated payment system as you can't afford to miss the premiums.
• While making a claim, form filling is an essential task that has to be done properly.

As you are always advised to protect yourselves and your family from any unexpected financial circumstances, unemployment is also a financial insecurity. You have to be prepared to protect your family with unemployment insurance.

Aditi Khandelwal is a Certified Financial Planner and a Content Creator who loves to simplify Finance. She can be reached on Instagram aditi.khandelwall_ and Twitter @aditik_29