The pandemic has had disastrous impact on the health ecosystem. However, the subsequent lockdown that followed adversely impacted the economic climate across the globe and specially in India.
India’s GDP in first quarter of 2020-21 contracted by 23.9 per cent, as per the National Statistical Office (NSO) and that led to lakhs of job losses in the private sector. We all have big pay-outs and a lion’s share goes in EMIs. If you are one of vulnerable ones then job loss insurance is a product which could be beneficial.
It is important to note that insurers do not provide job loss insurance as a standalone product. The only traditional unemployment policy is provided by Employees’ State Insurance Corporation (ESIC) on behalf of the union government under Rajiv Gandhi Shramik Kalyan Yojana (RGSKY) and Atal Beemit Vyakti Kalyan Yojana (ABVKY).
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What insurers offer as job loss insurance policy is an add-on with other policies that cover large risks, like critical illness, accident or home insurance. It is at times also offered with personal loans.
What is covered under job loss insurance
It does not act as a supplement for one's income in case of a job loss but will cover the payment for three biggest EMIs. However, that is also capped at 50 per cent of your income. The waiting period for the policy could be one to three months.
Proof of job loss required
An individual would not be eligible for job loss insurance policy without a written proof of termination of services. The policy will only come into effect if the termination is a result of conditions mentioned in the policy and is not a voluntary resignation by the employee.
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Exclusion could also include termination due to poor performance or pre-existing health conditions.
Different insurance companies have different eligibility criteria, hence, it is important to have clarity on what would be considered as termination, what happens if termination letter is not provided or the employer pays a severance package and what should be sought while opting for the add-on.
Job loss insurance can provide some relief in the short term and in most unexpected circumstance but it comes with a lot of limitations. Always invest and save accordingly to be ready for any tragedy in the future.
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