Unemployment insurance, also referred to as unemployment benefits, is a type of state-provided insurance that pays weekly benefits to unemployed persons. This means that eligible persons who lost their jobs can enjoy this insurance coverage. However, individuals must be eligible for this insurance before they can enjoy it. Persons who were fired or who quit their jobs are not eligible for unemployment insurance.
However, those who lost their jobs due to a lack of work and are not at fault are eligible for unemployment insurance. This insurance is a combined program between the federal and state governments. It offers regular cash payments to unemployed persons through the Federal Unemployment Tax Act, abbreviated as FUTA. In every state, there is an unemployment insurance program along with specific guidelines stated by federal law for them to follow. To be a part of this benefit, you need to confirm if you qualify and how you can be part of it.
Unemployment Insurance Eligibility Criteria
To qualify for this benefit, you need to meet two basic criteria. To be eligible for this, you must meet the state-mandated limits for time worked or earned wages, depending on the indicated base period. Aside from this, the state also determines if an eligible person is not at fault for the unemployment. However, a person can file an unemployment claim if or when they meet the two eligibility criteria required.
Also, it is important for persons who qualify to file claims for unemployment in the states where they worked. Instead of visiting in person, you can file a claim online through the unemployment insurance agency’s website or phone. Once the person gets approved for a claim, he/she would have to file a claim weekly that confirms their unemployment status.
How is Unemployment Insurance Paid?
This insurance is funded by taxes on employers. For instance, FUTA charges 6% of the first $7,000 paid to every employee’s wages. In some states, unemployment insurance is paid by debiting the past employer of the unemployed person’s UI account. They do this by increasing the UI taxes of the employer in the years to come.
Types of Unemployment
There are four types of unemployment. These types are
- Frictional Unemployment: This type of unemployment happens when workers leave their employer and take some time to find a new employer.
- Structural Employment: This is long-term unemployment due to crucial changes in the economy.
- Cyclical Unemployment: It is due to changes in the business cycle.
- Institutional Unemployment: This is a result of policies that affect the features of the labor market.
Individuals who fall under these unemployment types are eligible to receive the unemployment benefit.
Do I Need Unemployment Insurance?
You need unemployment insurance if you are an unemployed worker. Even though you are still employed, it is advisable to consider how you would manage financially if you ever lost your job. Getting unemployment insurance can shield you from financial expenses that may affect your savings after you lose your job. It allows you to enjoy unemployment benefits and keeps you steady until you get a new job.
Unemployment Insurance Advantages and Disadvantages
Before opting for this insurance, it is important to be aware of its advantages and disadvantages. This is to help you identify if it is worth taking or not, as well as if it is good enough for you. However, below are the advantages and disadvantages of unemployment benefits.
Advantages
- 50-60% of your salary may be the monthly payouts.
- Sickness and accident insurance may be added to this insurance to give more insurance coverage.
- Tax-free monthly income.
- Financial protection is offered until you get a new job.
Disadvantages
- In cases where you are aware of forthcoming unemployment when you purchased the insurance, you will not be paid.
- This insurance may not be available for company directors or self-employed persons.
- It is designed only for unemployment.
- Claims cannot be filed until after an exclusion period.
- If ever you lose your job due to incompetence or you quit your job, you will not be covered by this insurance benefit.
How early will I get my unemployment payouts?
If your claim is approved, you will get funded immediately as soon as the grace exclusion period has been completed. After that, you will be funded monthly until you can get a new job.
