Should You Buy Private Unemployment Insurance?

You walk into your office on a Monday morning, get settled in with a fresh cup of Joe and in comes your supervisor with a pink slip. What an unpleasant surprise, especially considering you’ve spent several years with your employer and your last evaluation was excellent.

To make things worse, you won’t be receiving a severance package: The only money coming in until you find a new job is what you hope you will get after you apply for unemployment benefits through the state, plus what you get from cashing out your vacation time, if that’s possible. Now what? (How to Apply for Unemployment Insurance will help with the first step.)

The only logical answer is to start searching for work immediately. However, if you had known about it – and signed up in time – you might have benefited from private supplemental unemployment insurance, a product developed by IncomeAssure. And you may want to consider it in the future, so you can protect yourself going forward.  

As you figure out how your finances might work out, ask yourself whether supplementary unemployment insurance would be worth it for you. 

When you enroll in an IncomeAssure plan and then lose your job, you become eligible to receive a monetary benefit that equals up to half of your weekly pretax income at your previous employer. This amount is derived from your weekly state unemployment benefit and your weekly IncomeAssure supplemental benefit.

To demonstrate: If you live in Florida and your annual salary is $65,000, your weekly earnings before taxes are $1,250. If you receive $275 per week from the state – the maximum unemployment benefit Florida offers – your check from IncomeAssure will be for $350 if you choose a salary replacement rate of 50%. This amounts to $625, or half of what you were earning each week prior to termination. Benefits are taxable and can be received for up to 24 weeks. If your state program has a benefit term that lasts less than 26 weeks, you may be able to obtain extended unemployment benefits. 

For starters, only salaries up to $250,000 are covered, and a six-month waiting period applies from the date of initial enrollment. (If your annual earnings exceed this amount, only $250,000 will be used in the calculation to determine the weekly benefit.) Also, the program works in conjunction with unemployment benefits, so you are automatically ineligible if you aren’t approved to receive state benefits.

What's more, you cannot enroll in an IncomeAssure plan if you are self-employed, or if you resigned from your previous position and are currently pursuing a new career opportunity.

In the event your employer severs employment before the waiting period lapses – or issues a layoff that was common knowledge among employees – you are only eligible for a refund of your premium payments rather than for benefit payments under the policy. 

The amount of your monthly premium will depend on the following factors:

• state where you are currently employed 
• desired salary-replacement rate (choices are 25%, 30%, 35%, 40%, 45% or 50%).  
• industry 
• number of extended benefit periods
• gross annual salary and commission

According to the website, most premiums are less than 1% of the member’s gross annual salary and commission in premiums, but you can use the online calculator to obtain a more accurate quote. “For example, if you make $75,000 per year, your policy could cost less than $50 per month,” the website adds. You should also know that premiums are waived during the period in which you are receiving benefits through IncomeAssure. 

Private unemployment wage insurance may be worth the investment if you want peace of mind and can comfortably afford to make the monthly premium payments. However, if you already have a hefty sum of cash stowed away for an emergency – or liquid assets on hand that you don’t mind tapping – it may make more financial sense to use those to support yourself after a layoff in lieu of paying monthly premiums. (For more, see  Help! My Unemployment Benefits Are Running Out.)