Now, job loss cover to make pink slip less painful

MUMBAI: Uncertainty in the job market has led to the introduction of a product that covers the risk of being laid off. Besides assuaging employees, the product could provide reassurance to wary lenders.

With many companies laying off employees and few new jobs being created, the risk of unemployment has increased. ICICI Lombard has introduced a cover that will pay three equated monthly instalments (EMIs) on any individual loan. The job loss cover is sold as an add-on cover with its critical illness policy. Apart from job loss and, as the name suggests, critical illness, the policy covers risks such as accidental death and permanent total disability.

Such cover is common in the West and has been around for a while. In the UK, there are over two million mortgage payment protection insurance (MPPI) covers ��� policies that pay loan instalments if the borrower loses her job. Claims under the policies have jumped 200% on unemployment spurting to a 12-year high in Britain. This has compelled insurers to hike renewal premium on MPPI covers.

Under the newly-introduced cover, the insurer pays three EMIs of the policy holder in the event of job loss. The job loss may be as a result of closure of a division or a department due to financial limitations or action of any public authority resulting in the closure of the employer���s company. The job loss also covers the EMIs in the case of termination from employment due to illness. However, there���s a catch: the policy does not cover retrenchment due to underperformance, voluntary resignation or early retirement.

The validity of the job loss cover is five years. In other words, if a borrower wants the cover throughout the term of a 15-year loan, he will need to renew the job loss cover thrice.

���If the individual uses the job loss cover option, she can renew it only after five years. If she doesn���t use it, the premium is not refundable,��� says ICICI Lombard head (customer service, health & accident) Sanjay Datta.ICICI Lombard is reviewing the possibility of increasing the three-month clause given the slowdown in the country. ���We are evaluating the possibility. Since this is an in-built feature in the mediclaim product, we have to seek Irda approval before making changes to the features of the product,��� Mr Datta adds.

As of now, there is no standalone job loss cover in the country. Even as job loss insurance has picked up in developed countries, it���s still testing waters in India. And even as other general insurers are mulling bundling their products with job loss covers, they aren���t confident of launching a standalone product to cover the risk of retrenchment. ���The products come with low premia. Despite recessionary expectations, they haven���t seen significant demand in the market. Unless we see significant volumes, there is no incentive to roll out standalone job loss insurance covers,��� an insurance broker said.