Pink Slips or Job Loss was western Phenomena few years back. In this globalized world, Job Loss is now a reality in India. On daily basis we watch News about Job Loss across sectors like Telecom, Media, Banking, Automobile etc.
Job Loss is more of Financial Setback then Emotional Setback. Situation gets worse if an individual is servicing loan/s like car loan, home loan etc or he/she is sole earning member of family. We Indians live in a superficial world. We always think that nothing can go wrong in our lives till harsh reality is standing in front of us or staring at us. If anything goes wrong then God is always there to pass the buck. Like our western counterparts, we should be ready both financially and emotionally for any eventuality in life including Job Loss. Let’s see how we can prepare ourselves financially for job loss scenario
1. Job Loss Insurance Cover:
This cover is very common in west but in India currently there is no standalone Job Loss cover. Sometime back Bharti Axa General Insurance applied for launch of Unemployment Protection Cover with IRDA but till now no info is available on their website. In all probability, it will be launched soon.
If you are servicing any loan like Home Loan or Car Loan then it is advisable to opt for Job Loss Cover. Under this cover, if a person receive pink slip then maximum 3 EMI’s will be paid by the insurance company. This cover is available as add on with Home Loan Protection Plan. In case of Car Loan, Hyundai provide similar cover in case of Job Loss.
2. Six Months Back up of Monthly Expenses
It’s very crucial and critical in today’s scenario. 3 months expenses should be available as liquid cash in Savings Account and another 3 months expenses should be available under debt instrument like FD’s or Debt Mutual Funds which can be liquidated at short notice. This corpus should not be touched at any cost.
3. Cut Down on Luxury Expenses
During Recession, It is advisable to cut down on all unnecessary expenses like Holidays, Dining out, House Renovation etc. All big purchases should be postponed for future. Any incentive / bonus received from employer should be invested or preferably can be used to prepay any outstanding loan.
4. Critical Insurance Covers
God forbids, During period of unemployment if there is any medical emergency. Company provided Health Insurance cease to exist at this time. It is important to avail critical insurance covers during employment like Term Insurance, Health Insurance, Accident Insurance, Critical Insurance Cover etc. Insurance covers will help to bear the cost of any medical emergencies during recession.
5. Ad hoc Financial Commitments
Besides backup for 6 Month’s Monthly expenses, it is important to keep separate corpus for next 6 months Ad hoc financial commitments. Ad hoc financial commitments covers quarterly kids school fees, Periodic Insurance Premium, Car Servicing, Society Maintenance Charges, Family Function etc
Last but not least, it is mandatory to be mentally prepared for any eventuality like Job Loss. If a person is mentally prepared then it will help to face the situation in more matured and practical way. Job Loss is not the end of the world but its a new beginning to re-discover yourself. It doesn’t mean that individual is not competant but he/she is a victim of wrong timing. Emotionally, family members and friends can be biggest support system. On Financial front, Above mentioned points help to prepare for any uncertainty in this highly uncertain environment. While closing this post, It reminded me of 1 question asked during IAS interview. Interviewer asked “Tell me 1 sentence which no one would like to listen during good times and same sentence is music to ears during bad times”. Answer is “This time will not last forever”.
Copyright © 2011-2013 Nitin Bhatia. All Rights Reserved.
Good article Sir! One of my friends prefer to go for HLPP instead of term plan just for the lone reason that it has loss of income rider. If we need to get covered under loss of income, I don’t think we have any exclusive plan that exist today.
He should have compared the extra premium he is paying for HLPP compared to Term Insurance. He could have saved that premium under contingency fund for any eventuality in future. Additional premium paid is much more compared to any potential benefit.
Ok Sir, thanks for your reply
And may i know how will it save one incase of job loss. Term insurance won’t pay and the difference in premium will be say 45-70K suppose that is the value and your principal outstanding is 30 lacs which is the way to go. when preparing for worst be prepared the strongest way and go for HLPP.
Majority of Job Loss is on performance ground. HLPP will not pay in this case. Secondly, only 3 EMI will be paid but you may please calculate the extra premium you are paying for this. It does not make sense financially. Its better to save 3 EMI’s in advance to pay case of job loss.
Okay but what about layoffs like we had in Nokia, it was not a performance related job loss but rather the company changed strategy and kicked ppl out?
In such cases, borrower can claim 3 EMI’s under HLPP.
Useful information.