Job loss insurance: What is it and who is eligible for the benefits?

Kolkata: The worst nightmare for a salaried individual is made of job loss situations. With the passage of years, we are going through increasing job losses in almost all sectors of the economy from information technology to manufacturing, startups to media. The management of different companies are constantly trying to adjust their cost structures and the wage bill is always in focus as a permanent cost. Significantly, job losses are no longer confined to economic downturns. Against this backdrop, job loss insurance is gradually growing in significance. Let's have a look at this type of insurance.

Significantly, the way job loss insurance claims can work out is dependent on the way the policies are structured. They can hand out lump sum payments as well as staggered payouts over several months. The staggered benefit model consists of a monthly amount that is agreed upon by the insurer and the individual insured at the time of buying the policy. Interestingly, there are also types of policies which offer benefits that rise every month of unemployment.

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According to insurance experts, job loss insurance is only available for those who work in the formal sector and draw a salary. The type of situation against which this type of insurance provides a shield includes involuntary separation of the employee, be it for business reasons or medical reasons. These includes termination, downsizing, lay off, technological disruption (such as AI adoption, automation), closure of the employer organisation, any such situation due to financial stringency, closure of business due to administrative steps or regulatory measures.

However, there are clearly defined situations where the job loss insurance won't offer any benefit. These are:

Voluntary resignation

Suspension, termination for frauds etc

Unemployment during the probation period of an individual

Inability to work on account of existing ailment

Those who are self-employed cannot claim benefits under these policies

Usually those losing jobs due to pandemic and/or public health emergencies are also excluded from the beneficiaries

Often it so happens that companies usually try to avoid termination and offers the argument that it adversely affects the CV of an individual. An employee is given two or three months notice to resign and they are either handed over a commensurate pay and the employee resigns. Under these circumstances, even if one has a job loss insurance, he/she cannot claim any benefit since it becomes a voluntary resignation.