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Can I Insure Myself Against Job Loss?

Question: How can I protect myself against job loss?  Are there any supplemental unemployment insurance products that I can purchase?

– Mark

Answer:

There is at least one company, IncomeAssure, that offers insurance policies that will cut you a monthly check if you lose your job through no fault of your own. Typically, they work like this: You pay a monthly premium — usually about 1% of your gross pay — to the insurer. Then if you lose your job and qualify for state unemployment insurance, you’ll likely also qualify for the insurer’s benefit, says Rosemary Haefer, vice president of human resources for CareerBuilder, an online job site. The amount often depends on how much you get from the state: With a policy from IncomeAssure, together the two payments will be about 50% of your pay before you were laid off.

But job experts say these policies are rarely worth it. While in theory they make sense for someone working in an industry or company that’s been laying off lots of workers, not everyone in a high-risk job will quality for the policy. And if you’re in jeopardy of losing your job in the near term, you’re out of luck: These policies usually must be held for several months before paying out benefits. On top of that, they aren’t cheap. If you make $100,000 a year, you may have to kick in $150 or more a month.

A smarter move is to “self insure” against losing your job by tucking away four to six months of income in an emergency fund, advises Gene Zaino, president of the consultancy firm MBO Partners.  To do this quickly and on a tight budget, consider temporarily diverting some of your retirement savings (at least the portion your employer is not matching) into a cash savings account, he says.  That, combined with your state unemployment benefits, should cover your basic bills for a while if you’re laid off.

For more:

Correction: An earlier version of this story incorrectly stated that Aflac offers supplemental unemployment insurance; it actually offers short-term disability insurance.

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    • 1

    • -1′

    • An emergency fund is much more cost effective than any insurance product. With insurance you are paying a premium to an insurance company, but with an emergency fund you are earning interest in a bank account. I know the interest is not enough to keep up with inflation, but it is sure better than paying fees to an insurance company. http://www.networthprotect.com

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