If you lose your job, you may be eligible for unemployment benefits or private unemployment insurance from your state – depending on a whole host of factors, including the reason for termination and your classification as an employee. Often these government benefits are very limited in terms of either duration or repayment, which does not provide new job seekers with much time or money to keep things steady while they search for their next job. To compensate for this limitation, special unemployment solutions do exist, albeit limited in scope.
Everyone knows that it is important to keep this reserve of funds in the event of an emergency or layoff, but it can often be difficult to create – especially as a young professional or entrepreneur. The most difficult thing is to build this reserve of funds not only for potential emergencies, but also for job losses.
What is private unemployment insurance?
Private unemployment insurance is an insurance product intended to supplement state insurance benefits should you lose your job. It is not intended to replace state insurance benefits or replace wages you earned while you worked.
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How much money do you get from unemployment insurance?
It depends on where you live, what you do to earn a living and how much coverage you want to buy. IncomeAssure has a calculator where you can get a quote. Uses recent unemployment data to see what is being billed.
Private unemployment insurance is an insurance policy that you buy for yourself to supplement your income if you become unemployed.
When you file a claim, this insurance will give you additional payments on top of the basic unemployment compensation you get from federal and state unemployment. Using private unemployment insurance gives you the option to supplement your unemployment benefit income and helps bridge the gap between your benefits and the weekly wages you receive upon hiring.
How does private unemployment insurance work?
When you sign up for IncomeAssure and lose your job, you are eligible to receive a cash benefit equivalent to up to half of your previous employer’s weekly pre-tax income. This amount is derived from your state’s weekly unemployment benefit and weekly additional income benefits.
While no one disputes the right of an insurance company to protect itself against issuing a policy to cover job loss for those who have sought to resign, retire, or be fired through poor job choices, some of these conditions should be a source of warning for those in situations. Medical professionals that may extend beyond the coverage of the FMLA or whose workplaces are located in areas prone to natural disasters, as none of these cases may be covered.
For those classified as independent contractors, the private unemployment insurance market is still limited. In most states, freelance contractors aren’t eligible for unemployment benefits, and neither IncomeAssure or SafetyNet extend their protection to that segment of the workforce either.
For independent contractors, facing periods of unemployment is a role risk. When such a period comes, the independent contractor should invest the time to review the working conditions they did for the last employer to ensure they are properly classified as independent contractors, are not misclassified, and who will then be eligible for unemployment protection from the state. (The IRS has simplified independent contractor testing to three broad factors with 11 conditions: behavioral control, financial oversight, and relationship type.)
Although the private unemployment insurance market appears to be limited, it is helpful to ask your insurance professional about any options that may be available to you in your sector of the workforce as part of your annual insurance review.
Alternatives to private unemployment insurance
· Supplementary Unemployment Benefit Plan (SUB)
The supplementary unemployment benefit plan is a tax-exempt plan under Section 501 (c) created by a company to help workers in the event of a factory shutdown, downsizing, or downsizing. It provides laid-off workers benefits that supplement their state unemployment benefits. 4 You will usually see SUB plans where seasonal layoffs of union workers are common.
· Emergency fund
One common defense against possible layoffs is to support a robust contingency fund. Instead of paying insurance premiums, set aside cash each month into a special savings account created to hold a job loss reserve. Resist the temptation to use this money for anything except to supplement your income in case of termination.
Certainly easier said than done; 37% of Americans won’t be able to pay $ 400 in emergency expenses without borrowing money or selling something. 5 But with state unemployment benefits providing a fraction of lost wages, supplemental funding of some kind is a necessity.
Bottom Line: Insurance products called private unemployment insurance were created to give you a way to supplement government unemployment payments. If you qualify to purchase the insurance policy and pay all of your premiums as agreed, then in the event of a job loss, you can collect your unemployment insurance benefits in addition to government unemployment benefits.
Private unemployment wage insurance may be worth the investment if you want peace of mind and can comfortably pay the monthly premiums. However, if you already have a massive amount of cash stored for an emergency – or liquid assets on hand that you don’t mind tapping into – it might make more financial sense to use that money to support yourself after a layoff rather than paying monthly in installments.