Due to COVID-19 pandemic, mostly all sectors are going through a lack of work and production /manufacturing predicament which is leading to financial crisis and job losses in the country. From the last two months, we have seen many companies cut salary, done lay-offs or closed their production/work for the time being.
This is the time when people think of their savings, insurance covers and emergency fund. Many insurance companies in India have started to give job loss insurance covers as well but with terms and conditions. This raises an intrinsic question. Should you opt for job loss insurance cover?
Let see if this is a good option?
What is job loss insurance cover?
- Job loss insurance cover is not based and available on a standalone basis
- It is an add on cover rider which can be taken with home loan protection plan or critical illness
- One has to pay the additional charge to avail job loss cover as it comes as an add on rider
- Should one opt for job loss insurance cover?
- If you have a high probability of losing a job or you think the sector for which you are working may face some financial crisis in the future then you must opt for this add on cover
- Job loss insurance cover provides you with instant cover relief from the financial crisis
- You need job loss cover or not depend on your job risk and your professional image
- The premium of this add on is totally on the probability of your job loss
- The premium ranges from 3%-5% of the coverage
Premium is calculated on various factors that are taken into consideration to arrive at an appropriate premium such as the age of the individual, tenure of the policy, EMI amount, the credit rating of the insured’s employer, number of EMI’s to be covered etc.
It is a cover which not only provides benefit to the insured but also the insurers
Companies that are offering job loss insurance protection:
1. ICICI Lombard's secure mind critical illness plan
2. HDFC Ergo’s Home Suraksha Plus (Home loan protection plan)
3. Royal Sundaram Safe Loan Shield (Critical Illness Plan)
Who can claim for the cover?
- One should mention the reason (crucial) of the job loss before claiming the cover.
- One cannot get the cover if he or she has lost the job when asked to leave, poor performance or someone in under probation period.
- In India companies mainly ask employees to resign during lay-offs so that they should not have to pay any extra money.
- This is the reason in India it is mainly unnecessary to claim or take the cover for job loss.
Sanjay Datta-Chief, Underwritings, Claims and Reinsurance, ICICI Lombard GIC says- “Due to the growing uncertainty of job security, and growth in unfortunate events such as mergers and Acquisitions, Cost reduction exercises by companies or contracting critical illness/Surgery one may lose his/her ability to work and thereby may not be able to meet his/her financial liabilities. Loss of Job insurance protects an individual’s financial liabilities as per the covers opted in the policy.”
Loss of job due to Non-Medical reason
- Involuntary unemployment due to medical reasons (Provided as an add-on)
- Loss of job due to shut-down/insolvency/bankruptcy of the place of employment of the insured (Provided as an add-on)
- The policy cover is just for five years in case of home loan protection plan. Don’t get confused that it will cover till the whole tenure of home loan plan
- Job loss insurance add on would cost more as compare to any stand-alone insurance coverage for job loss
- Instead of opting for add on job loss insurance cover, one should keep saving as an emergency fund which should be 3 months of your EMI
“The cover is not a standalone cover and is bundled with another policy like a health insurance or insurance cover provided on the home loan. The terms and conditions to make a claim are very specific and hence the job insurance cover may not be useful. Given the restrictions, I would suggest, individuals, do not rely on the cover but look at building an emergency fund with at least 6-12 months of their expenses." - Mrin Agarwal, Founder Finsafe India Private Ltd & Co-founder Womantra.
Who cannot claim for the job loss insurance cover?
- A self-employed or unemployed individual
- Unemployment in case of early retirement or voluntary retirement
- Job loss due to some existing illness
- Job loss due to fraud, retrenchment, termination, suspension or underperformance
- Job loss during the probation period
“Due to the growing mid-income segment in the society, a large number of people carry some of the other long term financial liabilities such as paying EMI against the loan, paying monthly instalments against linked plans such as SIPs etc. To safeguard ones financial liabilities, an individual may avail loss of job insurance to safeguard oneself and continue to meet such financial obligations” adds Datta.
Always remember that loss of job insurance will be offered to salaried individuals. It will provide cover against financial liabilities. Temporary or contractual employees will not be covered. In today’s scenario, the job loss risk is very high and people are going through the financial crisis. So, the one who is not saving as contingency can take add on covers with job loss insurance cover. Don’t get scared of losing a job. Protect yourself from the after-effects of job loss.