Yes, you heard us right! It’s “unemployment insurance”, not life, health, or automobile insurance that we are familiar with. Unemployment insurance covers for your expenses if you are suddenly dismissed from your job, for no shortcoming of your own, but due to other factors. These factors could range from annual cost cutting to impact of a recession in the industry.
Advanced economies such as the UK and USA have unemployment insurance, provided to people who lose their jobs due to some unexpected redundancies, for at least a year. There are some similar policies in India, but generally, only for factory workers. No such scheme, however, exists for private sector employees in India.
What then can you do to safeguard yourself, especially when the times are so uncertain? There’s nothing pleasant on the news and worst of all – you are not prepared for work-related contingencies!
Create your own “unemployment insurance plan”
Unless you have a trust fund to your name or parents who can cushion you in case you get laid off at work, your best option is to depend on savings, made from your job. Which also means that you must save, while you are employed.
It is indeed possible for you to have worked for a very short duration before you had to leave your job, so you might ask how would you manage to save anything significant in such little time?
It is recommended that you save at least 30% of your salary, every month. This saving should not lie idle in your bank account, but be put to better use.
Invest these savings into a mutual fund, which is easily accessible to you, which means, you can withdraw the saved amount at a day’s notice. Short-term Debt funds fit the bill well.
You should aim to accumulate about 6 months’ worth of your monthly expenses. The accumulated amount can be moved into a safe mutual fund, that doubles up as your ‘Unemployment Insurance Plan’.
Promise yourself not to touch this amount, in any other scenario. It is solely dedicated towards the unfortunate event of you being terminated from your job at present, without you having another job in hand.
Start creating your own Unemployment Insurance Plan today and free yourself from at least one financial worry.