What is Private Unemployment Insurance?

People Wondering About Private Unemployment Insurance

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According to the U.S. Department of Labor Bureau of Labor Statistics, 7.1 million Americans were unemployed in March 2020. The number of unemployed workers will increase significantly in April. Almost 17 million workers filed for unemployment in the three weeks ending April 4, 2020.

Job loss and unemployment is a serious concern for many, especially when you don't have savings built up to help you if you lose your job. Unemployment benefits are meant to provide financial assistance to people who find themselves unemployed under certain eligible circumstances.

However, these benefits do not fully replace the lost income from losing your job. It can be hard to make ends meet on the money you get from unemployment insurance. However, there are other options available to protect your finances and lifestyle if you lose your job.

Private Unemployment Insurance and other supplemental insurance policies are options to consider to protect your finances when you lose your job.

What Is Private Unemployment Insurance?

Private unemployment insurance, also known as supplemental unemployment insurance, is an insurance policy you buy for yourself to supplement your income if you are unemployed.

Private unemployment insurance will give you additional payments on top of the base unemployment that you get from Federal and State Unemployment. Private unemployment insurance gives you the option to supplement your unemployment benefit income and helps fill the gap.

Why Take Private Unemployment Insurance If You Have Government Unemployment?

The amount of Federal/State Unemployment insurance varies by state, so depending on which state you live in, and what your original income was before you lost your job, options for Private Unemployment Insurance may be more or less worthwhile. It depends on what your personal financial needs are. Caps on the State and Federal Unemployment Insurance benefits may not allow you to maintain your lifestyle.

How Does Private Unemployment Insurance Work?

There are currently not many options for private unemployment insurance, but here are examples of how the programs work with a description of what they can offer. 

  • IncomeAssure (currently only available for existing policyholders) by Great American Insurance Group was a traditional type of unemployment insurance concept. It offered supplemental cash benefits if you lost your job due or got laid off and are eligible for Unemployment Insurance. Payments followed the Federal and State Unemployment Insurance schedule, which is why we're referring to it as a traditional type of unemployment insurance concept.
  • SafetyNet (currently only available for existing policyholders) was an innovative policy that takes a different approach to provide a benefit to their policyholders in the event of unemployment. SafetyNet allowed the policyholder to choose between several levels of coverage. It didn't payout on a weekly basis, but rather offered a lump sum payment if you found yourself without a job.

The Benefits of Private Insurance

The Report on the Economic Well-Being of U.S. Households by the Federal Reserve from 2018 (released in May 2019) focuses on the financial status of American families.

In this report, 30% of respondents cited that they would not be able to pay a $400 emergency expense or would have to borrow or sell something to do so. Data like this makes innovative policies interesting as a "back up" supplemental unemployment or disability insurance plan.

Article Sources

  1. Bureau of Labor Statistics. The Employment Situation - March 2020. Accessed April 10, 2020.

  2. Department of Labor. "Unemployment Weekly Claims." Accessed April 10, 2020.

  3. Federal Reserve Board. "Report on the Economic Well-Being of U.S. Households in 2018." Accessed April 10, 2020.