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In today's changing world, the fear of losing a job due to economic instability and corporate restructuring is always there. Be it a pandemic, recession, or company restructuring, suddenly losing a job can be a big shock for anyone. In such a situation, responsibilities like rising household expenses, children's fees, and EMI (such as home loan, car loan) become a mountain of worry. But, is there any such security cover that can support your family financially in such a difficult time? The answer is 'Job Loss Insurance' or 'Income Protection Insurance'.

What is Job Loss Insurance?

Job Loss Insurance is an insurance product specially designed for your financial security in case of job loss. It provides you with a monthly income for a fixed period, so that you can pay your regular expenses, EMIs, and other bills. It is a kind of 'income protection cover' that does not let your financial condition fall during sudden unemployment.

In India, it is often not available as a standalone policy but rather as a rider to a personal accident policy, home loan protection plan, or sometimes term insurance.

How does it work?

The basic principle of job loss insurance is simple: if you lose your job due to unforeseen reasons (such as retrenchment or lay-off by the company), the insurance company makes monthly payments to you for a pre-determined period (usually ranging from 3 to 6 months).

For example, let’s say your monthly income is ₹50,000 and you have taken a job loss insurance that covers 50% of your income for 3 months. If you lose your job, you will receive ₹25,000 every month for the next 3 months. This amount will help you meet your EMIs, utility bills, and other essential expenses.

Important point: This insurance usually does not provide coverage in situations where you have voluntarily left the job (such as resigning) or you have been fired due to misconduct. Coverage is only available in cases like lay-off or company closure.

Benefits of job loss insurance: How will it help the family?
Continuous payment of EMIs
Home loans, car loans, and personal loans all come in the form of monthly EMIs. These become a major worry when you lose a job. Job loss insurance ensures that your EMIs are paid on time, thus preventing you from defaulting and losing your property.

Coverage of monthly household expenses
Rent, electricity bill, water bill, groceries, children's school fees - these are all essential expenses. The insurance proceeds help meet these expenses, so that your family does not face a sudden financial burden.

Reduction in financial stress
The stress of losing a job is huge in itself. When you know you have a source of income for a few months, the stress reduces significantly. It helps you focus better on finding a new job.

Safety
Many people keep their savings or contingency fund for emergencies. With job loss insurance, you don't have to break into your savings immediately. Your savings are safe, which you can use for long-term goals or more serious emergencies.

Confidence
Having financial security keeps a person's confidence intact. They feel more positive and motivated to find a new job.

Who should take this insurance?
Individuals with a stable income: It is especially useful for people who have a regular monthly income and are burdened with EMIs or monthly expenses.
Single-earner families: If you are the sole breadwinner of your family, this insurance can be a lifeline for your family.
People with high EMIs: For people who have large home loans or other large loans, this insurance is an effective way to avoid EMI default.
Workers in volatile sectors: Some sectors are more volatile than others. This is a good option for professionals working in such sectors.

Coverage and terms: Know before you buy
When buying job loss insurance, you should pay attention to a few important things:

Period of coverage: This insurance usually covers 3 to 6 months of income. Some plans may also offer coverage for up to 12 months, but they are less common.
Percentage of income covered: The insurance company does not pay out your entire income. It can usually range from 50% to 100% of your monthly income, depending on the policy.
Waiting period: Most policies have a waiting period (such as 90 days after buying the policy). If you lose your job within this period, you will not get a claim.
Eligibility criteria: Insurance companies determine eligibility criteria based on your age, profession, income, and employment history.
Premium: The premium depends on your income, period of coverage and the insurance company. It is usually not very expensive, especially when you take it as a rider to another policy.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.