Unemployment Insurance is a new concept to India. As far as I am aware, at the time of writing this article, there is no insurance product available in India which takes care of unemployment scenarios for the insured person.
Now there is some buzz around this job loss or unemployment insurance, as reportedly Bharti Axa Insurance has filed a proposal to IRDA for lauching the unemployment insurance products in India. In this article, let us see how unemployment insurance products work and what you should look for before buying such insurance products.
Are there any unemployment insurance policies or products available in India at the moment?
At the time of writing this article, I am not aware of any such insurance policy or product which is available in Indian markets that offers benefit in case of unemployment or job loss to an individual.
There are a few products which take care of other associated liabilities, but they come tied with other things. For e.g., if you take a home loan, the home loan providing bank may have a condition for you to take something which can be called as a "Home Loan Protection Insurance" which may take care of your EMI payments for a few months in case you loose your job and earnings. But since it is tied to your home loan, it will only take care of your EMI's and not of any other expenses.
Similarly, you may have a health and accident cover from your employer which may offer some benefit to you in case you meet with an accident and are unable to come to work. The benefit will be that you will be paid a fraction of your salary while you are away from work for a few months. So all these cases are tied to something or the other.
The pure "Unemployment Insurance" is still not available in India and that is what is expected to be launched.
What exactly is the "Unemployment Insurance" or Job loss insurnace?
Unemployment Insurance is an insurance product quite popular in overseas countries. Typically, a person purchases a insurance policy which offers him/her the benefits in case of job loss.
Such insurance schemes are either offered directly by the governments, or the individuals can purcchase such insurance schemes directly from insurance companies.
What kind of benefits can be expected from Unemployment Insurance Policies?
Usually, the Unemployment Insurance Policies are purchased by individuals by paying an annual premium amount.
In case they loose their jobs, then the insurnace company will pay them the money for covering their monthly cost of living for a specified number of months. The coverage for this cost of living may include EMI or house rent payment, living expenses like grocery bills, electricity bills, transportation charges, society maintenance charges, etc.
These details about what all expenses are to be covered will have to be possibly agreed upon at the time of purchasing the "Unemployment Insurance Policy". So obviously the more expenses you want to cover, the more insurance premium you will be required to pay.
Unemployment Insurance Policies & Product Details
For how long period will the Unemployment Insurance benefit be available?There will be only a specific no. of months during the unemployment period for which insurance benfits can be claimed. It obviously cannot be for indefinite period otherwise everyone would simply buy this Unemployment Insurance Policy and sit peacefully at home :).
As per the available news, the unemployment benefit is expected to be for 3, 6, 9 or 12 months period only for the insurance products expected to be launched in India. This period of coverage will have to be agreed upon at the time of purchasing the insurance policy. The longer period of coverage you select, the more insurance premium you will have to pay.
However, clarity would still be needed in case where you buy Unemployment Insurance for a period of 12 months, loose your current job and start getting Unemployment Insurance Benefits, and then get another job in 3 months time. So effectively, you paid premium and bought cover for 12 months, but utilized it only for 3 months. How will that 9 month benefit be used - will it be carried forward to some other year, will it lead to any reduction in insurance premium when you renew your Unemployment Insurance Policy next year - these are a few things which will need to be answered and seen.
Final Thoughts - Will it really be worth purchasing Unemployment Insurance Policies in India?
That's a million dollar question.
Clarity is expected on a lot of things only after a few such Unemployment Insurance products are made available in the Indian markets. Before that, nothing can be concluded.
Insurance is always a looked upon as a necessary but costly need by some, while some consider it to be useless and waste of money.
Once a few products are available, we will know about the cost of such insurance with respect to the benefits it will offer.
Also keep in mind that Indian Insurance market has its own dynamics - new and fancy products at the time of lauch always command high costs and lot of conditions are hidden and unclear. Keep a watch at this section (or Bookmark it) - we will definetely update this once a Unemployment Insurance Policy is launched, with its review and cost & benefit analysis.
Unemployment Insurance Policy in India
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