Simply Put: Job loss insurance

Venkatesh and Murali spend their Sunday afternoons sipping ginger lemon tea and catching up on worldly affairs.

Murali: The spate of job cuts in the Indian start-up space is demoralising! Every alternate day there are horrendous news headlines.

Venkatesh: Not just start-ups, even big companies such as Twitter have slashed jobs.

Murali: I guess once somebody is given the pink slip, they have to move on.

Venkatesh: What about EMIs, liabilities? Will the bank go easy on us because we suddenly lost our livelihood?

Murali: That’s where I think job loss insurance can help, atleast temporarily.

Venkatesh: Are you serious? Insurers cover for job loss as well?

Murali: Apparently, they do. Sold mostly as an add-on cover to personal accident policies or critical illness plans.

If the insured lose their job, the policy pays their EMIs for a period, say, three months.

Venkatesh: What if the company forces me to resign? Many a time there is no document to prove you are fired.

Murali: The policy wording talks about termination from employment of the insured. This has to happen during the policy period as per the employer’s rules/regulations. So, voluntary resignation, etc., may not be covered. There is a whole host of exclusions. Solid proof of retrenchment is a must.

Venkatesh: Okay. I have EMIs for home loan, car loan, personal loan, credit card loan, etc. Will they pay for all?

Murali: This can vary from policy to policy. Safe to assume insurers will pay three biggest EMIs, but there is a cap i.e. a certain portion of your income (say, 50 per cent).

Venkatesh: That’s not bad. What happens to self-employed persons if they lose their livelihood?

Murali: I don’t think they are covered. In fact, temporary and contractual employment isn’t covered at all. So, one must have a full-time permanent job.

Venkatesh: Understood. Some of my friends who were laid off got severance pay. Once the three months of EMIs are paid by insurer, I suppose that pay can help to get by for some more months. Because, at mid to senior levels, jobs don’t come easily.

Murali: Good strategy, but that should be checked. I think claim can be limited if severance pay is given by employer. That’s a grey area. Also, another grey area could be the notice given by some employers before firing you, or not renewing employment.

Venkatesh: Thanks for all the info but I think job loss insurance is not a super dependable option given the nitty-gritty. Plus, there are not many policies to choose from as well. Better option is to increase my savings.

Murali: That’s the best way. Keep 6-7 months of recurring liabilities in bank. That’s your emergency corpus. That’s the best insurance against job loss!

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