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Here’s How To Avoid Job-Loss Insurance Trap

Losing your job is a serious blow to you on mental, emotional and psychological levels. You situation-assessing capabilities take a hit. Mood swings may become quite common and your confidence may be hit quite bad too. To avoid such a scenario, there is something called job-loss insurance that you may be asked to go for. However, just like any other insurance policy, it will have riders which you may wish to avoid. However, we suggest you to not fall for the job-loss insurance trap. While it will not be easy, here are some tips to help you with the same.


Tips to Avoid Job-Loss Insurance Trap

Tip #1 – Assess Your Situation

We have established what may happen to you when you lose your job. That said, assessing your situation in such times is necessary. This will help you understand a few things about your habits. These habits can be related to your fixed spending, saving or managing daily cash flow (commuting expenses, etc). Also, take a look at your employment-related papers and see how much money is owed to you and vice-versa. After all, when you know how much money you will have left can you think about putting it to any use.

Tip #2 – Get rid of loans

Now that you have assessed your situation, the second thing you need to do is get rid of your loans, if possible. What we are talking about here are short-term loans, such as credit card advances. This way, at least you will be able to bring your expenses further down. Avoiding any interest payments will be a bonus here. As for long-term loans, speak to the financier and if possible, try to negotiate for a new term. This way, even if you cannot control the cash outflow, you can reduce it.

Also Read: Here’s What To Do To Retire Early

Tip #3 – Continue with insurance plans

Instead of opting for a job-loss insurance policy, just continue your life insurance and/or medical insurance policies. In usual cases, one pays for these policies one time for a year. However, for those paying for such policies every month, our advice is continue paying. You never know when the need to avail either policy may arise. Job loss means you may not have enough cash at disposal. These policies will help you reduce that burden, which is what you need at such a time.

Tip #4 – Utilise emergency savings smartly

It goes without saying (and with experience) that having an emergency fund is necessary for working people. After all, with job uncertainty not coming down any time soon, you do not want to be caught off guard. In the case of a job loss, this tip should follow the first tip we mentioned. However, regardless of the order of tips here, keeping an eye on emergency funds and their spending is important. You never know how long it may take to get a new job.

Also Read: Handle These Financial Tasks Right Now

Tip #5 – Consider part-time working and assess future prospects

Lastly, two things to do after a job-loss do not even remotely talk about relying on job-loss insurance (that is, if you have one). To do so, consider working part-time. This will help you earn some money which may not be equal to your salary but will be an addition nevertheless. Secondly, do consider the future prospects of your industry. Read up about the employment trends in your industry for this. Then assess your future and where you wish to be.


Losing your job is not something you will ever be aware about beforehand. While opting for a job-loss insurance during your employment may seem like a good idea, it is not. It will just give you a crutch that you will then hang on to. Instead of going for a job-loss insurance, prepare for such a time beforehand and keep a tab on the condition of the industry you work in. After all, as you will hear quite often, preparing for bad situations beforehand is better than controlling damage later.

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