Explaining unemployment insurance
- 14TH JUNE 2007
Few people nowadays can claim to have a job that is totally safe. Even those who excel in their chosen field and command the respect of everyone they work with can all too easily find themselves becoming the unexpected victim of an acquisition, merger or other form of corporate restructuring.
There is therefore a lot to be said for taking out unemployment insurance if you are self-employed or redundancy insurance if you are employed to tide you over until you find another job. Unemployment insurance or redundancy insurance can be obtained for a relatively modest outlay, can replace a significant proportion of your salary or self employed earnings.
Unemployment insurance and redundancy insurance typically pays a monthly benefit for up to a maximum of 12 months, which will in most cases allow adequate time to find another job. The better policies will start to pay out after you have been out of work for only 30 days and their benefit payments will backdate to day one.
In view of the highly limited nature of the so-called ‘State safety net’, having the prop of an unemployment insurance or redundancy insurance policy can make the difference between subsisting and continuing to live in reasonable comfort.
Those who lose their jobs may not find it too hard to cut back on buying meals out and new clothes, but they will still be faced with a significant range of costs for essential items – the ability to pay for which can easily be taken for granted when you are in work.
For a start, there are the small matters of housing costs, utility bills, food and travel. Having to agonise about whether you can afford a train fare to get to an interview is the very last thing you need when you are trying to get a job.
But anyone who buys unemployment insurance or redundancy insurance should do so with their eyes wide open, because unemployment insurance or redundancy insurance will not pay out for every single eventuality.
It is essential to realise that it does not cover unemployment or redundancy that you knew was going to occur when you took out the unemployment insurance or redundancy insurance policy and that you can only claim if you have been continuously in work for six months immediately before your employment ended.
It is also vital to be aware that unemployment insurance or redundancy insurance does not pay out if misconduct leads to your dismissal and that it only covers unemployment or redundancy that is involuntary. This means that if you resign voluntarily or even accept voluntary redundancy you are not entitled to claim.
The self-employed are also severely disadvantaged by the fact that unemployment insurance will not pay out if they stop trading on a temporary basis. To qualify for a claim they must actually cease trading altogether.
Those who are self-employed or who work in industries where voluntary unemployment has become a very common way of exiting employment should therefore think very carefully about whether they would be getting good value.
For those in many other jobs, however, taking out unemployment insurance or redundancy insurance is likely to be considered a cornerstone of financial planning and the cover can sit comfortably alongside other insurance that protects against being unable to work as a result of suffering health problems.
