With unemployment benefits guaranteed for only six months in most states, laid-off workers should have a plan B for when benefits run out.
One insurance product that tries to bridge the gap between state unemployment benefits and a worker’s former salary is private unemployment insurance from Assura Group. The supplemental policy provides up to half of your wages in benefits for salaries up to $250,000 a year, minus the amount being paid by the state.
“There are some products that are tied to credit — if you lose your job, they will pay your credit card, or if you buy a Hyundai and lose your job, you can return a vehicle,” says Leslie Nylund, CEO of Assura Group.
“Ours is the only product that if you lose your job and are approved for state unemployment, you get a cash benefit.”
IncomeAssure, which is underwritten by Great American Insurance Company, is available in 42 states and Washington, D.C., and by mid-November will be sold in almost every part of the country.
The coverage does have its limits. IncomeAssure covers salaries up to $250,000 for 24 weeks, and has a six-month waiting period before a claim can be made. Although the claims process is tied to state benefits, IncomeAssure doesn’t keep paying if state benefits are extended beyond the initial 24-week period.
Underwriting is based on your state, industry and “salary band.” You’re ineligible for coverage if you’re a part-time or seasonal employee; work for a company with fewer than 50 employees; or already are unemployed, Nylund says.
Once you’re approved, the only reason for a claim to be rejected after a six-month waiting period is if you are fired for cause and don’t qualify for state benefits, Nylund says.
Making a claim
If you live in New York, for example, and earn $150,000 a year, or $12,500 a month, in the financial industry, IncomeAssure would pay $4,495 a month, according to the calculator on the insurance company’s site.
Together, with your estimated monthly New York state unemployment benefit of $1,755, you would receive a total monthly benefit of $6,250, or half of the monthly salary for your last job.
The estimated premium for such a policy would be $183.52 a month or $2,202 a year. The company says premiums are in the range of 0.5 percent to 2.0 percent of salaries. But you don’t have to pay the premium while you’re collecting benefits.
The limited nature of the benefits could prove helpful in the short-term to helping adjust to a change in lifestyle dictated by a lay-off, according to Edward Graves, associate professor of insurance at the American College in Bryn Mawr, Pa.
“It’s like what we suggest for life insurance — if you’re not going to leave enough benefits to maintain the standard of living the family was used to, then you have to plan for a transition period in which the family budget gets trimmed to what will be the new level of sustainable income,” Graves says.
But career coach Julie Jansen questions whether people in this economy will want to add another bill to their monthly expenses.
“It’s going to be a small percentage of the population that will do it,” says Jansen, author of “I Don’t Know What I Want, But I Know It’s Not This: A Step-by-Step Guide For Finding Gratifying Work.”
“For a lot of people, it’s not something they would be able to afford. It’s hard enough for people to buy health insurance — the only kind of insurance people are willing to buy is car insurance.”
Robert DiGiacomo is a Philadelphia-based freelance journalist. He has written on travel, education, personal finance, career issues and other topics for The Washington Post, USA Today, Monster and CNN.com. He is also the co-founder of The City Traveler, an online travel magazine.