What Is Unemployment Insurance?

Losing a job can be scary. It seems like you need money for everything nowadays, and unfortunately, it doesn’t grow on trees. You are a hard working person, and you deserve to live a life where you can at least get by. If you lose your job and qualify, an unemployment insurance policy can help support you until you are back on your feet. It can help make it easier to find a job without stressing about money until your hair starts to fall out.

Unemployment insurance is a way for people who faultlessly lose their job to receive benefits while they look for new work. This is a joint federal-state program that provides a weekly cash stipend to eligible unemployed workers who are actively seeking new employment. You are likely eligible for unemployment if you were laid off or fired for reasons other than gross negligence. Benefits usually cover around half of your previous paycheck, but benefit payouts vary case to case. It is not the same amount a person was making before the job loss, but it is a considerable benefit that really does help many, many people.

How Unemployment Insurance Works

Businesses are required to pay unemployment insurance taxes based on the wages they pay their employees. Individuals can file for unemployment in the state where they worked by phone or on the state’s unemployment insurance agency’s website. The application usually takes two to three weeks to process and be approved. After the approval of a claim, participants must file either weekly or biweekly reports that confirm that they are still unemployed and searching for work. Some states will require you submit proof of job searches, or attend mandatory training sessions to stay eligible for your unemployment benefits. Missing these update reports can cause you to lose your unemployment eligibility. Someone who is drawing from unemployment cannot refuse work during this time and must report any income worked, including freelance work or work paid for in cash.

Will Unemployment Replace My Entire Paycheck?

Unemployment insurance benefits rarely pay out your previous salary. The money is meant to keep you afloat financially while you find a new job and is capped both in weekly payouts and how many weeks you can draw benefits. On average, unemployment will cover half of previous earnings, and can be paid out for 26 weeks a year. If you are unable to find work in the 26 weeks, you may become eligible for extended benefits, which can give an extra 13 to 20 weeks, depending on state and personal situations.

Who’s Eligible For Unemployment Benefits?

Only workers who faultlessly lose their jobs through downsizing or other unavoidable circumstances. Workers who voluntarily terminate their employment or who are self-employed are not eligible to draw on unemployment insurance benefits.

Tip: Have An Emergency Fund

Unemployment insurance can be critical to staying on top of bills and expenses after job loss, but it is not a good idea to rely on it entirely, due to caps on weekly benefits. It is also important to note that workers can only receive up to 26 weeks of unemployment benefits a year, which could also cause problems when budgeting. Because of this, it is essential to have an emergency fund in place. Your emergency fund should have enough money to cover three to six month’ worth of living expenses.

Final Notes

With good risk management and preparation, you can stay on solid footing if you lose your job unexpectedly. While we keep our finger crossed and hope for the best, unfortunately, some things are just out of our control. When these unexpected layoff, or similar situations, happen, there is support as you look for new work. That support is unemployment insurance.