What Was Private Unemployment Insurance?

Getting fired is never a pleasant experience, and being let go with no severance package is even worse. However, if you saw the bad news coming—and signed up in time—you might have benefited from private supplemental unemployment insurance, a product that used to be offered and is no longer in use.

Those who previously purchased policies through the two primary company that provided this coverage, IncomeAssure and TruStage (formerly SafetyNet), can still use the benefits. Today, though, neither company offers it to new customers.

How Does Private Unemployment Insurance Work?

Let's look at how an IncomeAssure plan works for someone who is still covered by one. If someone has this coverage and then loses their job, they become eligible to receive a monetary benefit equal to up to half of their weekly pretax income at their previous employer. This amount is derived from their weekly state unemployment benefit and their weekly IncomeAssure supplemental benefit.

To demonstrate: If you live in Florida and your annual salary is $65,000, your weekly earnings before taxes are $1,250. If you receive $275 per week from the state—the maximum weekly unemployment benefit Florida offers—your check from IncomeAssure will be for $350 if you choose a salary replacement rate of 50%. This amounts to $625, or half of what you were earning each week before termination. Benefits are taxable and can be received for up to 24 weeks. If your state program has a benefit term that lasts less than 26 weeks, you may be able to obtain extended unemployment benefits. 

Eligibility for Private Unemployment Insurance

For starters, only salaries up to $250,000 were covered, and a six-month waiting period applied from the date of initial enrollment. (If your annual earnings exceeded this amount, only $250,000 would be used in the calculation to determine the weekly benefit.) Also, the program worked with unemployment benefits, so customers were automatically ineligible if they weren't approved to receive state benefits.

What's more, you could not enroll in an IncomeAssure plan if you were self-employed, or if you resigned from your previous position and were pursuing a new career opportunity.

If your employer severed employment before the waiting period lapsed—or issued a layoff that was common knowledge among employees—you were only eligible for a refund of your premium payments rather than for benefit payments under the policy. 

How Much Does Private Unemployment Insurance Cost?

For existing customers, monthly premiums depend on the following factors:

• State where you are currently employed 
• Desired salary-replacement rate (choices were 25%, 30%, 35%, 40%, 45%, or 50%).  
• Industry 
• Number of extended benefit periods
• Gross annual salary and commission

In past agreements, most premiums were less than 1% of the member’s gross annual salary and commission in premiums. In this way, if a person earned $75,000 annually, it would cost under $50 monthly for their policy. Additionally, premiums were waived during the period in which they were receiving benefits through IncomeAssure, for example.

The Bottom Line

Private unemployment insurance was a product available to Americans looking for an additional buffer in the event they were laid off from their job. Today, it is not being offered to new customers and is only available to existing customers of the two main providers: IncomeAssure and TruStage.

Given how rare this type of insurance is, it is important to be ready if you unexpectedly face unemployment. If you don't have an emergency fund—a savings account to cover things like your rent and utilities, in the event that your income stream suddenly dries up—start one now and try to set aside enough to cover at least three to six months worth of living expenses.