​A job loss is a threat to your financial stability. You may not be able to pay off your bills, EMIs, or other important expenses. Job loss insurance is a financial cover for for people who lose their job. The sum assured will give them a financial respite for some time at least. COVID-19, the lockdown, and general economic downturn has led to many people getting pink slips, or companies shutting down. In such cases, insurance is a good way to protect yourself and your loved ones. Job loss insurance provides some financial relief to full-time workers if they lose their job.

In India, insurance companies offering job loss insurance is a recent phenomenon. Let us find out all about it –

Most insurance companies do not provide a separate insurance cover for job loss. It is provided an add-on in other insurance products. For e.g., ICICI’s Secure Mind is a policy that covers loss of job as part of another policy. It covers-

• Accidental death and permanent disability due to accident
• Diagnosis of any of the 18 critical illnesses covered.
• Loss of job due to retrenchment or layoff. This clause is covered only for 2% of the sum assured for a        maximum tenure of three months.

 But the loss of job cover is not available for

• Self-employed individuals
• Circumstances of employment were within the control of the Insured
• Job loss within first three months of employment
• Resignation by the insured

Policybazaar provides an insurance product for job loss through a tie-up with three insurance companies – SBI General, Universal Sompo, and Aditya Birla Insurance. This insurance policy provides income replacement benefits when there is a job loss due to

• Termination or layoff or
• Accident resulting in partial or permanent disability or death

The insurer pays

• EMIs of the loans of the insured for three months
• Weekly salary benefit for a limited time in case of job loss due to death or disability

Self-employed people are also covered under these policies. As of now, the insured can avail of tax rebate under Section 80D too.

Our View

It is great that job loss is being considered as a critical incident that has to be insured against. But the policies are not very beneficial. Most of the insurers provide job loss insurance as a part of another insurance policy such as loan insurance. The exclusions and terms and conditions make the policy less than useful. The typical exclusions are –

• Termination or suspension from job due to underperformance
• Voluntary retirement
• Voluntary resignation (Many layoffs are executed as voluntary resignations)
• Job loss due to disciplinary action, existing illness and during probation period
• People running their own business or those who are self-employed are not covered in many cases.