Unemployment insurance provided through your employer provides a safety net if you lose your job through no fault of your own. It applies if you are laid off because the company is reducing staff. It applies if a company closes down for a period of time or actually goes out of business. As long as you were not fired for cause, chances are you are eligible to receive unemployment insurance.
Unemployment Insurance Through Your Employer
Employers are required to set aside a certain portion of funds to pay state and federal unemployment taxes. As an employee or former employee, you are entitled to receive unemployment insurance provided you have been working for a sufficient period of time and your job performance or behavior on the job was not the reason for your dismissal. Part time workers, temporary workers and the self-employed are usually not covered by employer-paid unemployment insurance. For those people and many others that want more protection should they lose their job, there is private unemployment insurance.
Are Unemployment Insurance Payments Considered Taxable Income?
When you receive any kind of unemployment insurance payments, that money is required to be reported on your income tax as earned income. Make sure you include it on your 1040 form to avoid problems with the IRS.
How Long Do Benefits Last?
Generally, your state offers up to 26 weeks of insurance and if you have not found a job in that time you may apply for extended benefits. The Federal Government extended the length of unemployment benefits for many hard hit individuals who could not find a job in recent years to 99 weeks. After that is exhausted, you are pretty much on your own.
Purchasing Private Unemployment Insurance
Purchasing private unemployment insurance can provide coverage when state and federal unemployment insurance does not apply. It can also supplement other unemployment insurance you might receive through your former employer.
The following are 4 reasons why it might be a good idea to purchase private unemployment insurance:
Reason Number 1 – Critical Illness
You can purchase an unemployment policy that will provide benefits if you are diagnosed with a critical illness during the life of the policy and can not work because of that illness. For example, imagine going for a routine checkup and being told you have cancer. Your employer may be sympathetic to your cause and try to accommodate your needs, but eventually, an employer’s generosity will run out. If you need chemotherapy or other treatment that requires you to be away from work for an indefinite period of time, you will not be able to hold on to your job.
In addition to the stress and trauma of going through treatment for cancer, you are also faced with the prospect of having no means to pay your monthly bills. You do not qualify for employer sponsored unemployment, but, if you have a critical illness unemployment policy, you will be compensated. Generally speaking, these types of policies pay you a lump sum once your diagnosis has been confirmed. The settlement is based upon the size and amount of your policy and can be used in any way you deem appropriate. There are several shortfalls to this type of policy. Pre-existing conditions are not covered. Not all critical illnesses are covered. If you have a family history of certain illnesses or diseases, you may not be able to get coverage or you will be forced to pay higher premiums.
Before you take out a critical illness unemployment policy, you should read the fine print carefully. Not all policies are alike. Find out just what is covered and if you are comfortable with the terms, than it is okay to purchase the policy.
Reason Number 2 – Temporary Injury That Keeps You Out of Work
If you break your leg or hurt your back while you are away from work, you may not be able to return to work for several months. The financial strain of not having a pay check for two or three months can be alleviated if you have this type of private unemployment insurance. It can provide you with enough money to get by while you recover and are able to return to work. The premiums you pay for this type of insurance might seem high when you see the money coming out of your paycheck, but, if circumstances make it necessary to file a claim, you will be glad you had the foresight to take out the coverage.
Reason 3 – Paying the Mortgage
The biggest monthly expense that most people have is the mortgage. You can purchase unemployment insurance that will pay your monthly mortgage payments while you are out of work. This type of insurance can give you great piece of mind and keep you from worrying that you might lose your house. A typical policy can be set up so the mortgage payment is sent directly to your mortgage company by the insurance company. In that way, your payment will arrive on time and you will not accrue any late fees or penalties.
Reason 4 – Coverage When You Do Not Qualify for State Unemployment Insurance
As mentioned earlier, there are a number of different groups of workers that simply do not qualify for traditional employer-sponsored unemployment insurance benefits. Part time workers are usually excluded from the unemployment policies of their companies. Similarly, temporary workers are not covered by the firms they are working for unless they become permanent employees. Perhaps the group that needs private unemployment insurance the most is the self employed. If you are running a one-man operation and something happens that makes it impossible for you to continue to work, you may be able to collect benefits if you have a private unemployment policy.
What You Need to Look for in a Policy
Finally, here is a word of caution about private unemployment policies. There are many times when your claim will be denied because you do not have sufficient proof that you are not working because you can not work nor can not find work. If you are in a casual business at home such as doing occasional contract work, you may not be able to get a policy to cover times when you are not working.
Check with your insurance agent and read the policy over carefully before you sign on the bottom line and begin paying premiums. Not everyone needs these types of policies, but for those in situations where a private unemployment policy makes sense, shop around and get the best policy you can find at the best price.
Michelle is a freelance writer for an insurance comparison and enjoys spending her free time with her three children at the local YMCA. She has a background as an insurance agent and loves discovery new ways for people to save money when purchasing policies.
- 1 Unemployment Insurance Through Your Employer
- 2 Are Unemployment Insurance Payments Considered Taxable Income?
- 3 How Long Do Benefits Last?
- 4 Purchasing Private Unemployment Insurance
- 5 What You Need to Look for in a Policy