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Unemployment Insurance in India

IndianMoney.com Research Team | Posted On Thursday, September 12,2019, 05:34 PM

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Unemployment Insurance in India

 

 

‘It is a recession when your neighbor loses his job; it is a depression when you lose yours.’ This is a beautiful quote on employment by Harry S Truman, who was elected as the 33rd President of the United States of America. The country had about 31 million unemployed people as of March 2018 as per a report by the Centre for Monitoring Indian Economy (CMIE).

It has been reported by the same body that the rate of unemployment soared to 7.2% in February 2019.These numbers clearly indicate that unemployment is a major problem in India. The situation is not improving at all. Given this case, many scholars and experts have begun questioning the viability and existence of the insurance for unemployment.

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Concept of Employment Insurance

Unemployment insurance is unique. It is offered by the government but not by public or private sector insurance companies. Salaried individuals who buy unemployment insurance receive benefits if they lose their job involuntarily. There are instances where some companies ask their employees to resign their jobs.

When employees become unemployed unwillingly, unemployment insurance comes in handy. The benefits of this form of insurance may be accessed for a given tenure. Remember that the insured individuals are required to meet the specified conditions to be able to claim. For example, the people who resign from their jobs voluntarily are not eligible to receive the benefits.

Private Unemployment Insurance

Job insurance is a recent development in the Indian insurance industry. Insurance companies do not sell it separately. It must be bought as an add-on along with a home loan protection policy or critical illness cover. Job insurance is a must for people working in the IT industry. Why? Many IT companies tend to merge with some other companies, acquire other companies or revamp their own business.The consequences of corporate restricting may lead to layoffs. When employees are asked to leave the organization, it becomes difficult for them to sustain the financial loss. Thus, a job insurance cover comes in handy under such circumstances.

Job Insurance Policies Offered Today

The following insurance policies offer the job insurance cover:

  1. Safe Loan Shield by Royal Sundaram
  2. Secure Mind by ICICI Lombard
  3. Home Suraksha Plan by HDFC Ergo.

What are the Exclusions of Job Insurance?

  1. Job losses caused by poor performance before or after the probation period
  2. Self-employment
  3. Unemployment during the probation period
  4. Job losses due to pre-existing medical conditions
  5. When an employee is asked to leave the company on the grounds of unethical business practices

Prime Features of Job Insurance

Job insurance also benefits insurance providers just like other insurance products. The insurers are not really concerned about whether or not a job insurance cover is required for the applicants. The reason forjob loss matters a lot. The cover can only be claimed when the job loss reason is covered under the policy.When you buy a job insurance cover as a part of your home loan protection plan, then the tenure of the policy does not exceed 5 years. The premium ranges from 3-5% of the overall coverage.

Unemployment Claims in India

Unemployment insurance is not a familiar term among the Indians. But, the Government of India does offer some benefits to unemployed people. In India, the labour laws have been formulated to ensure the well-being of the working community. Under the Employee State Insurance Act, 1948, the unemployed population receives several benefits.The point here is the awareness level among unemployed people is very low in the country.

Rajiv Gandhi Shramik Kalyan Yojana (RGSKY)

Rajiv Gandhi Shramik Kalyan Yojana is a scheme, which is beneficial from the perspective of unemployed people across the country. The scheme was introduced by the Central Government on 1 April 2005. Under the Employee State Insurance Act (ESI) Act, all employees are expected to benefit from the scheme. The terms and conditions of the plan are subject to change from time to time.

Salient Features of RGSKY

  1. The individuals who have the work experience of at least three years are qualified to avail benefits under the scheme.
  2. Allowance shall be provided for a maximum tenure of 1 year.
  3. The policy has to be claimed within 6 months from the last working day.
  4. The policy also entails a provision for health care benefits for the insured individuals.
  5. As soon as the beneficiary gets a job somewhere, the allowance provision gets expired.

Points to be Considered Before Buying Job-Loss Cover

Not all insurance companies have the same terms and conditions as far as job-loss covers are concerned. So, policy buyers are required to be aware of these things. If your employer gives you separation pay, check whether or not you are eligible for the claim. Can I get the claim if my employer offers me a notice period as per the employment terms? Can I get the claim if I do not have a written document to prove that I have been asked to leave the job?

Is There Any Better Option Than a Job-Loss Cover?

Job-loss covers have certain restrictions and limitations. The scope is also limited. Apart from job-loss covers, there is another lucrative option. What is that? People may consider creating and maintaining a contingency fund. If you reserve some funds for emergencies or contingencies, you can afford to get the bare essentials. Short-term investments can also help you manage the financial distress.

Common Types of Unemployment in India

1. Disguised Unemployment

Disguised employment is commonly observed in the agricultural and unorganized sectors. It occurs if an organization has more employees than required.

2. Seasonal Unemployment

Seasonal unemployment occurs during certain seasons of the year.

3. Structural Unemployment

Structural unemployment occurs when people do not get jobs due to the lack of the required skill, experience or education.

Although the concept of unemployment insurance has been widely discussed, it is not the type of insurance that private companies can offer. Keeping in view the interests of private sector employees, the government should consider rolling out schemes that would save them from financial crisis.

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