Tata Consultancy Services Limited (TCS) has decided to lay off about 12,200 employees this financial year, which will have the greatest impact on mid and senior-level employees. The country's largest IT service company is carrying out the biggest layoff in its history. The reason for this is the focus on future-ready skills and the large-scale adoption of AI. In such a situation, job loss insurance, which very few people used to take earlier, is now in the news again.

What is job loss insurance?

If someone suddenly loses their job, job loss insurance helps the person to meet the necessary expenses. It provides support until another job is found. It helps to cover necessary expenses like loan installments, rent, electricity, water bills, and medical expenses so that one does not have to put a hand in savings.

According to Gurdeep Singh Batra, Executive Vice President of Bajaj Allianz General Insurance, this is a good option for those who are worried about losing their job. Especially in sectors like IT, startups, and manufacturing, where frequent layoffs have become common and are not just limited to the recession.

How payment and premiums work

The payment method in job loss insurance is pre-determined. Some policies pay the amount every month for some time, while some pay the entire amount at once. Most policies have a fixed model in which the person keeps getting a fixed amount every month while he is unemployed. But the payment starts only when the person remains unemployed for a certain number of days continuously.

Generally, a person gets up to 70% of their salary, but it can vary in different insurance companies. Giving an example, Batra said, one can get up to Rs 10,000 every month for three months, depending on the number of days he remained unemployed and the waiting period in the policy. He said, there are some policies in which you get Rs 5,000 in the first month, Rs 10,000 in the second, and Rs 15,000 in the third, so that the person keeps looking for a new job.

The premium of this insurance depends on the person's salary, the period of the policy, job risk, and whether it is taken alone or in a group. Batra said that the premium is less in a group policy from a company or bank. The premium also depends on the industry or job role. The premium can be higher in sectors with higher risk.

Who can take job loss insurance?

This insurance is only for salaried employees of the formal sector. Whether the employee is in a multinational company or a startup, if the company comes in the formal sector, it will be covered, says Sajja Praveen Chaudhary, director of Policybazaar for Business.

Job loss insurance usually covers involuntary unemployment due to business and medical reasons. Chaudhary said that if someone is fired due to a change in structure in the company, a reduction in expenses, or a government order, then it will be covered. If we look at the current examples, then this can also be covered if the job is lost due to AI in the company.

The claim will not be available in these cases.

For a person who is self-employed or already unemployed

On losing a job during the trial period

On early retirement or resignation on his own will

On losing a job due to any pre-existing illness

On losing a job due to poor performance, fraud, or suspension

When can the claim be rejected?

According to Batra, this product is still new in India, so the rules of every company can be different. Generally, a claim is not available on voluntary resignation, retirement, losing a job during the trial period, or being fired due to indiscipline. Apart from this, if the job is not contract-based, seasonal, temporary, or on the direct payroll of the company, then the claim will also not be available. Claim will not be available even if the job is lost due to pre-existing conditions like illness or epidemic, unless there is separate coverage for it in the policy.

Is it right to take this insurance?

It looks like a safety net, but there is a catch in it. Many big companies pay salary for 3 months at the time of layoff, after which the employee has to resign. This is considered a voluntary resignation on paper. Chaudhary said, companies do this so that the employee's career is not tainted by the dismissal. No one wants it to be written in his resume that he was fired, so companies provide this facility.

But on paper it is considered a voluntary resignation, so the claim of job loss insurance is not available, unless the employee proves that he was fired.

These options should also be there at such a time

Keep an emergency fund ready: Save money equal to 6 months' expenses so that there is no problem in case of sudden job loss.

Take insurance along with the loan: With this, the insurance company pays the EMI of the loan in case of job loss and your property remains safe.

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