How useful is a job insurance during unemployment?

Over the last year, the world around us has changed upside down. Nobody imagined the Covid-19 pandemic to become a global pandemic of such a scale that its impact would be felt even outside the realm of health. The pandemic was followed by an intense lockdown in various parts of the world including India. It destroyed lives, jobs, global economies, and personal wealth all at once. One doesn’t need data to realise that Covid-19 infection has caused massive job losses and significant pay cuts across sectors. We all know someone who has been a victim of unemployment recently. This was followed by severe financial constrain in many families.

While the need for health insurance is on an all-time high today, there is an equal buzz around the concept of job insurance policy as well. It is a type of insurance cover that offers financial aid in case the breadwinner of the family loses his job. To cover the unpredictability of job life, insurance of this kind can be a great solution. Under this policy, the insured is eligible to get compensation upon losing the job during the policy term. However, the job loss must be due to one of the pre-determined reasons mentioned in the policy document.

Job insurance as a rider benefit

It is critical to note that insurers don’t offer job loss insurance as a standalone benefit. Traditionally, Employees’ State Insurance Corporation (ESIC) provides unemployment policy benefits on behalf of the union government under Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) and Atal Beemit Vyakti Kalyan Yojana (ABVKY).

On the other hand, a typical job insurance cover is mostly availed in the form of rider/add-on benefit attached to products like personal accident cover, critical illness cover, etc. The insured can add an income loss add-on provision to such existing policies to cover for the after-effects of a severe accident or illness. In fact, job loss coverage is also offered with personal loans if the amount is huge. Such insurance plans spare you from specific liabilities like home loan EMI cover for a specific duration. If you’re worried about getting laid off by your company without notice, a job insurance plan can help in dealing with the situation.

Inclusions and exclusions

A job loss insurance add-on shouldn’t be mistaken as a substitute for one’s monthly income. While it can cover the payment for three of your biggest EMIs, is also capped at 50% of the insured person’s total income. The waiting period for the policy could range from one to three months depending on the insurer. If you’ve taken the income loss add-on with your personal accident or critical illness cover, you’ll be duly compensated for a loss of income in case of an accident, illness, or disability occurring during the policy tenure.

Meanwhile, the rider won’t be effective if the nature of your job is contractual, temporary, seasonal or simply casual. Even if you lose the job due to any fraudulent act, poor performance, breaching company policy, etc., your claim might be rejected. Youngsters must note that a claim for income loss cannot be filed if you’re still under the employer’s probation period.

Documents and process for filing claim

In case the policyholder loses his/her job due to a valid reason, they must intimate the insurer about the same. Supporting documents like proof of termination, etc., should also be provided to get the final nod from the insurer.

The insurance company will also need written proof of retrenchment from the claimant. The claim amount is provided only if the termination is not voluntary and a result of the conditions mentioned in the policy. Here’s the list of documents required to be produced at the time of claim filing for income loss.

– Duly filled and signed claim form

– Proof of job/income loss

– Termination letter

– Claimant’s ID Proof

– Salary Slips and Form 16

– Claimant’s Age Proof

– Company’s Details

– Copy of policy documents

– Other documents as required by the Insurer

The renewal process for job loss insurance doesn’t require any separate procedure since it’s a rider. When you renew the primary policy, you can continue with the add-on of income loss or get a new one if your previous policy didn’t have this facility up until now.