Jobless insurance is an add-on

While jobless insurance is currently offered as an add-on to cover loan Emis, it is a matter of time before India sees a full-fledged job loss insurance

In a globalised economy, there are plenty of employment opportunities. But every time a major economy sneezes, markets around the world catch a cold. During periods of volatility, job security is not certain.

In such situations, it is essential to have a hedge for any sudden changes in your career. Have you ever wondered what would happen if you had to take a break from employment What would happen to your home loan EMIs and health insurance premiums if you were to lose your job Looking for another job may be an option, but what if the economy is in turmoil and jobs are hard to come by

India, with its vast population of skilled and semi-skilled workforce, has no social insurance structure in place. However, with rising financial awareness and insurance penetration, unemployment insurance can make a difference.

What exactly is unemployment insurance Unemployment insurance is a popular insurance tool globally, especially in developed nations. It is an insurance product that provides financial protection when faced with an unforeseen job loss.

In case of a job loss, the insurance company pays for expenses such as loan repayments or pays the policyholder a fixed monthly income for a limited period of time. You can choose a coverage based on your fixed obligations and choose your premium accordingly. The higher your coverage, the higher the premium you pay for your policy. The period of coverage is also another deciding factor of premium charges. The benefits are limited for a short tenure of three to six months, which is enough for you as a policyholder to look for an alternate job or income source.

Unemployment insurance in India Currently, there is no private company offering unemployment insurance. Some players had initiated plans in the past, but could not attract customers as expected.

The government on its part offers work-related disability benefits through the Employees State Insurance Corporation of India (ESIC). However, this is applicable only if you are earning less than `15,000 per month while working in a factory with 10 or more workers or office with 20 or more employees.

The premium for such a policy is paid partially by the employer and the balance by the employee. Employees pay 1.75 per cent of monthly wages while the employer contributes 4.75 per cent of the monthly wage towards the insurance plan.

If one contributes towa-rds ESIC for more than three years, then he/she would be automatically covered under the Rajiv Gandhi Shramik Kalyan Yojana. Under this scheme, one can get 50 per cent of one’s salary each month for a maximum period of one year if he/she faces sudden unemployment provided the job loss was not due to any professional incompliance.

For others, there are no effective stand-alone unemployment policies. However, these policies are often bundled with other insurance products. For instance, many home loans come not only with discounted life cover, but also unemployment cover for up to three or even six months of EMI.

However, before opting for one, remember to check all conditions attached to the policy plan. These plans come with conditions on the nature of job loss, type of company, reason for job loss, etc. Also understand the actual cover you would be eligible for. Since unemployment insurance is not an independent product, but an add-on, the actual cover may depend on the original financial product availed.

Making a case A job loss is not a routine affair and can impact a family’s socio-economic standing. A single-income family of four, including a working husband, a wife, and two children, can become vulnerable with no help if the earning member loses em-ployment. Loan EMI defaults, defaults on insurance premiums, bill payments, and other routine expenses leave the family vulnerable and monetarily insecure. With an unemployment insurance plan, families can at least have a cushion to fall back on during adverse times and strive to rebuild their lives in the unfortunate event of a sudden job loss without affecting other essential needs.

With new insurance plans being introduced post relaxation of FDI norms in the insurance sector, it is hopefully only a matter of time before unemployment insurance makes a renewed entry helping the common person fight sudden job loss.

(The writer is the CEO of Bankbazaar.com)