President Obama wants more of us to have insurance that would make up the difference between a job we might lose and any new, lower-paying one we might take. He said so in his State of the Union address in January. But what if you couldn’t get a new job, or wanted to hold out for one that paid as much or more than your last one? That’s where private unemployment insurance may come in. It could make up some of the difference between your state unemployment check and your old salary. When I last wrote about this in 2009, the prospects for insurance companies selling such coverage seemed grim.
But since then, a product called IncomeAssure has emerged that might serve at least some worried people well. In exchange for a monthly premium, you receive a check for half of your weekly pretax pay before the job loss minus whatever you get in your state unemployment check. Anything this unique comes with a pile of catches and caveats — and legal ways to game the system. IncomeAssure’s FAQ tackles some of them, but I’ve done my own with some pointed additions.
Let’s say you live in New York and earn $100,000 annually. The highest possible weekly unemployment check is $425. But your weekly pretax salary is $1,923. Half of that is $961.50. So if you signed up for the maximum benefit from IncomeAssure and then lost your job, you would receive a weekly check for $536.50, which is the difference between $425 and $961.50.The product covers the gap for people earning up to $250,000. If you earn more than that, you’ll get a check (and pay a premium) based on only $250,000 in annual income. The check is taxable income, just like unemployment checks. There is a two-week pause before payments kick in, and they continue for a maximum of 24 weeks after that. If your state doesn’t pay unemployment benefits for that long, IncomeAssure will add money to your check whenever your state stops paying. The extra amount will get you to that 50 percent replacement rate for the remainder of the 24 weeks.