How Much Severence Can You Expect If You Lose Your Job?

If I lost my job my employer would pay me a severance package.   At least that is what they normally do.  There  is really no promise or guarantee that I'd get severance but whenever I've heard of other people losing their jobs they've gotten severance.    In the past the company has had some large lay offs and they shared tables to estimate the severance amount you would get.   The severance here works out to roughly 1 week of pay per year of service.

I went out to find data on how much severance companies usually pay.  I didn't find a lot of information but I did find a couple sources.
This AARP article Read This Before Accepting a Severance Offer claims that "Slightly less than 50 percent of employers provide some amount of severance pay to workers whose employment is terminated."
An article in the CNN Money Ask Annie column How Much Severance Pay Can You Expect? says: "about half of employers offering two weeks' salary for each year you've worked there. Slightly more than one in three pay one week's salary per year of service; and fewer than 20% offer less than a year's pay per year of service."

If I add both those pieces of data then I estimate the following rough approximation for how much employers pay out in severance. :

Of course this is based on two unattributed data sources and I don't know how accurate either is so it should be taken with a large grain of salt.

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Unemployment Rate by Nation

Our current unemployment rate is 6.7% as of December 2013.   Thats a lot better than it was a couple years ago but its still not a great number. 

I got the list of countries unemployment rates from Wikipedia as of January 2014.  The data there is subject to change and the rates quoted are from slightly different time periods per nation.
I pulled out just the OECD nations

Here's the chart :

click for full size

You can see there that the USA is right around the middle.   In fact we're a bit better.  The median is 7.3% and the average is 9%.   And you can see theres quite a range.  Greece is all the way up at 27.4% and Switzerland is only 3.1%.

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Are Employees Unskilled or Picky or are Employers Too Picky?

Notice :  this is a semi-rambling, venting and opinionated article.  Just giving you fair warning.

I ran across this article Why Millions of Job Openings Are Unfilled which seems to claim in general that many jobs aren't filled due to lack of skilled applicants.   They talk of "scores of employers practically begging for new hires to fill openings to no avail". I'm not sure if they realize that score means 20 and that scores means 40 or more.   So in relation to the USA economy thats a minuscule drop in the bucket. But thats OK I will set that nitpicking aside for now so I can get on to the bigger complaint.

Here's the bit I really wonder about...

They have this quote : 

"Another cause of the supply-demand imbalance is a persisting stigma towards blue-collar jobs. Many people simply believe that certain jobs are "beneath them" and simply aren't interested.

Krystal Wells, owner of Portland, Ore.-based cleaning service The Other Woman, recalls how difficult it has been to find good workers to join her staff.

"I have gone as far as contacting over 400 different individuals that I took the time to read their profiles to see if from what I read they would be a fit and custom pick the people who most fit this job to call," Wells said. "After all the people I contacted, I had one person that was interested and never showed up to the interview."

OK first of all they refer to "contacting over 400 different individuals" that she "took the time to read their profiles".    I"m not really clear whats going on there.    That sounds like she's skimming Linked-in or something looking for possible candidates.   Then she says she was looking to "custom pick the people who most fit this job to call".    It really sounds like this woman didn't put out a job ad but instead went browsing somewhere for people she might hire.  I don't know what she was looking at.  Theres no mention of where these profiles were.   I'm really confused.    Maybe she's reading the profiles of 400 applicants?    If she got 400 applicants then couldn't find someone to hire then that doesn't mean that people think the job is "beneath them" but instead means that there are literally 100's of people wanting that job.   But that doesn't match what they said, cause they are saying that many people think this job is beneath them.   So there must not be 400 applicants and so she's just browsing Linked in?    I'm confused.    If you want to hire someone you don't just go ask 400 strangers if they want to work at your company.  You post an ad to Craigslist or wherever and then sort the replies.   Pure and simple.


And the thing is that the woman is looking for people to clean houses.   I have to think that if you're looking to hire people to clean houses and you browse 400 profiles to look for the "custom fit" for the job that you *might* just be a little too picky about who you hire.    That sounds more like the job search process some Fortune 500 companies put into hiring their CEOs.

Of course there is no indication of what she wants to pay them and I have to wonder if its a minimum wage job.    I found the companies website and it doesn't list a wage and says the work is 25-30 hours with 1 week of vacation after a year and no mention of any other benefits.   I don't know, and its quite possible that she wants to pay handsomely.   But it doesn't say that anywhere.  It doesn't say "and I was going to pay $15/hr or $20/hr".    Sounds more like lowish pay with virtually no benefits and not even full time hours.     Now thats common enough for house cleaning work I'd guess, but its not really going to entice the best applicants.

I honestly doubt there are a lot of people who prefer to clean houses for a living.   Some people do enjoy that work and it can be a fine job for those who do it but I think most people really prefer other jobs if they can get them.    So yes I bet that most people aren't interested in such a job.    As an employer seeking to hire people for this work you have to understand that kind of thing.  You aren't going to get a line of 100 highly skilled people lined up with awesome resumes begging to work hard for relatively low wages.    Maybe I'm assuming too much here but the woman talks of reviewing 400 profiles (a lot of hunting) in order to get a "custom pick" for her job which sounds to me like someone who's really very particular and picky about who they want to hire.  As an employer its easier to be super picky when you have a ton of interested applicants but you don't have that luxury if there aren't as many interested people.     If you really do insist on being very particular about who you hire and only want to make sure you get the absolute best people then you really do have to pay more.   I see no mention of paying more and honestly I have to assume that the opposite is likely the case and I'm guessing its low pay.

You know what they could do to find fill that job opening?   Stop being so picky or pay more.   Its not that hard to figure out.

The article is looking at the number of unfilled jobs and trying to explain why they are unfilled.    A couple years ago I looked at that topic myself and I wrote :


Why 3.2 Million Unfilled Jobs Isn't as Big as It Sounds

Open jobs are a natural part of the work place turnover.    People come and go and jobs aren't filled immediately so there is always going to be a certain number of open jobs.   It normally takes a month or two to fill a job so there's always some empty jobs as they are emptied and filed on an ongoing basis.   

This is a simplistic way to look at it :   Is McDonalds hiring people right now?    Yes McDonalds is probably hiring.   Why is that?  Because someone is always in the process of leaving McDonalds because they have high turnover.   So that 'help wanted' sign at McDonalds does not mean that American workers  lack the skills to work at McDonalds.   Now lets just extend that idea across the entire economy and there will be naturally 2-3% of jobs open at any given time.   Its not an indication that workers are lacking the right skills.  

And actually the number of job openings goes up when times are better.  We had about 4 Million job openings back in 2007 when unemployment was under 5%.   It wasn't a problem back then.   Nobody was trying to claim there was a giant skills gap.    Its not really necessarily a problem now either.   You can't just magically fill 100% of the job openings immediately.  

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Official Unemployment vs Unemployment, marginal and Underemployment 1993 too 2012

How many times have you seen this kind of statement in the last few years? :  "The official unemployment rate cited by the government is 7.8% but the REAL unemployment rate is 14.4% if you include the underemployed."    Of course the underemployed and marginally attached workers are out there when the economy is good too.   When unemployment was 5% were people running around making sure we were all aware that the 'REAL' rate was 9.2%?   Not that I recall.

I pulled the numbers for a few years back off the BLS Table A-15 charts Here's a look at the official unemployment rate versus the larger rate including marginally attached and underemployed part time workers from 1994 to 2012 :

(click for larger size)

Those numbers are monthly seasonally adjusted figures for
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)
versus
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

As you can see in the chart the broader U-6 unemployment measure plus the marginally attached and underemployed workers is generally a few points higher than the simple unemployment measure.   The numbers are roughly proportional as well.    The marginal and underemployed number is around 60-80% of the unemployment number.

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Tracking More Predictions from Money Magazine

A few days ago I looked at some financial predictions for 2012 that were reported by Money magazine.  It was a mostly mixed bag of failure.   I found 3 more general economic predictions in that issue and we'll talk about those today.   Keep in mind these predictions are for the year 2012 and we're only about 6 months past when the magazine was pointed.    

Jobs   -- Forecast : 8.5%   Actual: 8.1%

On page 86 the magazine indicated an expectation that unemployment would be 8.5%.  Today the April 2012 unemployment rate sits at 8.1%.

Housing -- Forecast : Sales of 4.8M homes and prices up 0.25%, Actual : sales 4.6M and median prices up 10%.

Page 74 they said that 'The median expectation among more than 100 economists and real estate pros surveyed by MacroMarkets is that home values will inch ahead by a mere 0.25%."  and that "Freddie Mac forecasts that only 4.8 million homes will be purchased in all of 2012"   The reality so far in 2012 is a bit different.  According to a Bloomberg article the sales are at a 4.6 million annual rate as of April but median prices have jumped 10% year over year from $161,100 in April '11 to $177,400 in April '12.

Gold prediction by Suze Orman -- Forecast : $2100 by 11/2012.   Actual : $1570 level as of May 2012

Money reported a tweet from Suze Orman she made in Oct. 2011 where she predicted that gold will be "$2100 by 11/2012"    and recommended having 10% of your portfolio in the shiny stuff.   I found her reiterate the $2100 target on Nov. 10th last year    Gold started the year 2012 about $1600 and hit a high of $1781 in February.  Today its back down to $1570 level.    

Generally I'd say all 3 of these predictions are wrong at least so far...

Unemployment is 0.4% better than they expected, Home prices are up 10% and gold has not gained the $500 or +30% increase per Ormans prediction.

We'll have to wait till the end of the year to make a final conclusion.   But for now the forecasts aren't proving very accurate.

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2010 Unemployment Figures By Specific Occupation

A while ago I wrote about Unemployment Figures by Occupation but that data was for broader occupational groups.

The Wall Street Journal has a page with a search function so that you can find the unemployment rate per specific occupation.   The data they used is from the BLS and tracks 500 individual occupations.

The data on the WSJ page is from 2010 so its not very current.  Still it could be interesting or even useful for you to know what unemployment looked like in a specific occupation.   

I've looked all over the BLS site and for the life of me I can't find where the unemployment rates for specific occupations might be find.  It has to be there, but I just can't find it.   There is a LOT of data on the BLS site and its easy to get lost over there.

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Reasons for Unemployment

One of the things that the BLS tracks in the unemployment data is the reason that people are unemployed.   You might think that the reason someone must be unemployed is that "they lost their job", right?   Well, no not everyone.  Some people do lose their jobs by being laid off or terminated, other people finish temporary jobs, some people re-enter the job market after being out of the market for a while and still other people are newly minted college or high school grads entering the employment market for the first time.

Here is how the mix looks for October 2011 :

 

Source : BLS A-11 Unemployed persons by reason for unemployment, seasonally adjusted

Between new entrants, reentrants and people who left their jobs that equals 42% of the people who are unemployed.   Interestingly a pretty large portion of the unemployed did not get fired or laid off. 


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Why 3.2 Million Unfilled Jobs Isn't as Big as It Sounds

Image by bgottsab

Recently CNBC ran an article about how there are 3.2 million job vacancies in the US.    Given that there are around 14 million unemployed people and over 3 million vacant jobs it would seem that if we simply matched the people to the jobs we could cut unemployment significantly right?   Well no, the solutions to our unemployment are not that simple or easy.

The 3.2 million job vacancies are primarily due to natural worker turnover.   Every day people quit their jobs or are fired.   This happens day in and day out whether the economy is strong or if we're in a recession.   The 3.2 million open jobs are mostly just transitional jobs that are being vacated and filled week to week.

A certain amount of employee turnover is a normal thing for any business.   Fast food restaurants can have turnover of up to 300% which means they replace 300% of their workforce in a single year.   In other words the average employee only lasts 4 months.    THats pretty extreme and most businesses are far lower.   On the other end of the spectrum some of the Best Companies to Work For have voluntary turnover rates as low as 2% per year.   Even at the best places to work, some people will naturally move on to other things whether through retirement, moving or simply a desire to change jobs or careers.

The Bureau of Labor Statistics tracks the job vacancies and turnover at the Job Openings and Labor Turnover Survey (JOLTS) site.   Here are the latest stats from July 2011:


job openings = 3,228,000
job openings rate = 2.4%
hires rate 3.0%
turnover rate 3.0%
quits rate 1.5%
layoffs/ discharges 1.3%

The total number of unemployed people in the nation is not a static group of individuals and people are always joining and leaving the ranks of the unemployed.   IN the month of July 1.5% of the workforce quit their jobs and 1.3% were laid off or terminated.   Those two figures add to the number of unemployed.   There are also other separations from retirement and 'other'.   On the other end 3% of the population was hired.   That figure subtracts from the unemployed. 


The total 3.2 million job vacancies which is equal to 2.4% of the workforce is just a snapshot of one day in time.   Anytime someone quits their job or is fired the number of job vacancies goes up.  When someone is hired the job vacancies go down.   It takes time to fill any job so at any given point in time there will be jobs open.  The open jobs may have been open for a day, a week, a month or 2 years.    If 3% of the population either quit or was let go from their job and 3% of the population was hired then for the month 3% of the population was in transition from unemployment to employment.   Seems reasonable that if you take a snapshot of the economy then you may find 2.4% open jobs. 

Illustrative Example

 Lets look at a pretend example to illustrate how this happens.   Consider imaginary XYZ corp. who makes widgets.  XYZ has 100 employees.   Right now they have 3 job openings.  THey need to hire a welder and two warehouse stockers.   In the first week of the month, Bob in accounting retires and is replaced by Jane who is fresh out of college.   Bob had given his notice a month ago and HR hired Jane officially last week.  Ed the delivery driver is fired for having another accident with the company truck.  The ongoing interviews for warehouse stockers finds two good candidates Mike and Rick.  Mike stays but the Rick hates the warehouse job and quits after just 3 days.  Becky in clerical has also quit since she is going to go back to college and get her masters degree.  At the end of the month they hire Dave to replace Ed as the new delivery driver.   At the end of the month there are openings for a welder still, another warehouse stocker and the clerical job Becky left.

Job vacancies at the start of month = 3
Separations: Bob who retied, Ed was fired, Becky and Rick quit for a total of  = 4 separations
Hires : Jane the new accountant, Mike and Rick the warehouse staff and Dave the new driver = 4 hires
Job vacancies at the end of the month = 3

The 3 job vacancies at the start of the month are not the same openings as the 3 jobs available at the end of the month.   The only job that stayed open the whole  month was the welder job.   The other jobs were filed or opened during the month.  

If you take this example and then multiply it by about 140 million and you get something that looks like the US labor force.   On any given day someone is getting fired, laid off or retiring.  Jobs are opening and other jobs are closing.  


How long do jobs stay open?

The BLS doesn't seem to track the time that jobs are open.  At least I can't find anything about that on their stie.    However I found some other studies that discuss the time jobs stay open in general.

I found this study from Utah which looked at their job market in 2009.  At that time they measured how long jobs were staying open.    45% of their jobs were open less than 30 days and 28% of the jobs were filled in 30-60 days.    They also listed 23% of the jobs in the 'constantly recruiting' category.   For those jobs the employer has enough turnover that they always have openings.  This is likely at a bigger company like GE or retail places with high turnover like McDonalds or Walmart.thats 68% of the jobs.   What I think is more striking was the fact that only 4% of the jobs were open for over 60 days.   That is a very small amount of jobs that stay open for a long period of time.  The majority of the jobs openings were closed within a month or are openings that are always open due to constant turnover.  Of course thats specific to one state in 2009 so it isn't exactly the same across the nation or in other years.   But its evidence how many of the open jobs at any given time are NOT open for long periods.

Another study from 2004 measured the 'average time to fill' job vacancies.   They found that the average time it took to fill a job opening was 37 days.   It varied by industry from 26 days for retail at the low and 51 days for government jobs.

Of course the employment market in Utah and the numbers from 2004 are not what we'll see today nationwide.  But I can't see any reason to think the national job vacancies today are significantly different than these studies showed.   I would assume that most of the job vacancies in the USA are open for less than 60 days and or constantly recruiting.   And I think its also safe to assume that only a small minority of the job openings stay open and unfilled for a period of time longer than 2-3 months.

Bottom Line:   The 3.2 million job openings are not jobs that stay open a long time and are primarily due to ongoing employee turnover.

Puzzling Claim that Construction Jobs are In Demand

Yahoo has an article titled Blue Collar Jobs in Demand for 2010.   The article says that the jobs on the list  are those that "experts say are most in demand this year".   The list of jobs is basically a list of construction industry careers:  Plumber, Elevator installer, Carpenter, Electrician, HVAC and Roofer.  The only other non construction industry job on the list is auto mechanics.

The problem I have with this article is that these construction jobs are not really in demand today.   According to the BLS, the current unemployment rate in 2009 for the construction industry was 19.0%... 19%!!   That 19% unemployment rate was nearly double the national unemployment level in 2009.   Not only is it very high its actually the worst among all industries in the BLS list.   I honestly don't know how anyone could say that jobs in an industry with the highest unemployment rate of 19% are "in demand".  Is there something I'm missing here? 

On the other hand longer term construction jobs will have pretty good demand.   BLS info on the Construction industry says "The number of wage and salary jobs in the construction industry is expected to grow 19 percent through the year 2018, compared with the 11 percent projected for all industries combined."   So over the next 8 years you should see good job opportunity in construction.    You'll also see lots of job opportunity due to retiring baby boomers, the BLS says opportunity will be good "because of the need to replace the large number of workers anticipated to leave these occupations over the next decade."

Construction jobs are not what I'd consider "in demand" right now.  The demand for construction labor should be pretty healthy over the upcoming decade.

Unemployment Trends for College Grads vs HIgh School grads vs High school Drop outs

The national unemployment rate just dropped to 9.7% in January 2010.   Thats still a high number but it is good to see it go down if only marginally.    The unemployment rate differs substantially between people with college degrees and those with a high school diploma or those who failed to finish High School.  

You can get unemployment data from the BLS.   You can break down unemployment figures based on sex, race, education level and age.    They only break it up for education level for people over 25 years old, so all the data below is for people over 25 years old.

Current unemployment rates for January 2010:
High School Drop outs = 15.2%
High School grads = 10.1%
College Degree holders = 4.9%

The unemployment rate for people with college degrees is around half the national average.   High school drop outs are unemployed significantly more than people with more education.

If you look back over the past 10 years the trend is pretty consistent.

The ability to obtain and keep employment is another benefit of education.  College grads have a clear advantage in much lower employment rates.

Unemployment is NOT at a record

So I'm reading the news headlines and I come across this one: "U.S. unemployment hits record but job losses slow". Oh, no! I think to myself, this must mean that unemployment jumped above 20%. But then I read the article and it says this:

"However, the Labor Department said the unemployment rate raced to 9.4 percent, the highest since a matching rate in July 1983, from 8.9 percent in April. This reading beat the peak in the jobless rate during the 1973-1975 recession that lasted 16 months."

Well reading the title of the article and that quoted bit makes it sound as if 9.4% is the "record" at least post 1973. They say 9.4 is the highest since 1983 when it matched the rate and it is above the rate in the 73-75 recession.

Of course this isn't a real record though. They should know that unemployment during the Great Depression was over 20%, right? OK maybe their records don't go back that far like how the mortgage foreclosure/delinquency records only go back to 1972. No that doesn't explain it either cause the Bureau of Labor Statistics has unemployment data going back to the 1940's.
Its not too hard to find that the unemployment rate hit 10.8% back in 1982. Our current unemployment rate of 9.4% isn't even a record in the past 30 years. If you reread that bit quoted above, it makes it sound as if they were looking at data at least going back to 1973 so surely they should have spotted the peak in 1983. I find it odd that the article talks about "record unemployment" then talks about our current 9.4% rate matching what we had in July 1983 and exceeding what we saw in 1973 but neglecting to mention that unemployment was 10.8% in 1982.


Let me make it clear:

The current 9.4% unemployment rate is not a record. Unemployment was 10.8% in 1982. Unemployment was well over 20% in the Great Depression.

The current 9.4% rate is not even close to a record by any measure.

Now what I bet the author of the article meant to say is that the total number of unemployed people is at a record. That much is true. The total number of unemployed people is a record right now. But you know what is also true? The total number of people in the labor force hit a record in May as well. The population of the USA also hit a record this past month. In fact the nation has had quite a few months of record setting population totals now. While our population is growing it really doesn't make a lot of sense to report the "news" that labor figures also grow. Sure we have more unemployed people now than in 1982 or in 1973 but there are also many more employed people now than in those previous decades.

For a look at how the current recession stacks up to previous see my previous article on Comparing Unemployment Increases During Recessions

Comparing Unemployment Increases During Recessions

I thought it would be interesting to look at the rate of increase in unemployment during this recession and compare it to previous recessions.

The BLS has monthly historic unemployment data. This CNBC article has a list of the recessions from the 20th century. So I pulled the monthly unemployment rate and then looked at the unemployment levels during the previous recessions. Then I charted the unemployment from the start of each recession until 6 months afterwards. The unemployment rate for each recession + 6 months is shown below.

The red line is the current recession. The yellow line is the July 1981- Nov. 1982 recession.

Looking at it another way I plotted the increase in unemployment from the start of the recession. The following chart shows the cumulative increase in unemployment from the start of each recession out through 6 months after the recession ended:



Again the current recession is in red. I highlighted three other recessions that had similar increases in unemployment. The Nov. 1948 - Oct. 1949 in yellow, July 1953 - May 1954 in green and August 1957 - April 1958 in light blue. Since this recession started the unemployment rate has gone up 3.3%. For each of those other 3 recessions the unemployment rate went up 3.1-3.4% in the first 10 months. The rate of increase in unemployment during the current recession is very similar to the rate of unemployment during the recessions in the late 40's and 50's.

The unemployment rate usually peaks at the end of the recession or within 3 months after the recession ends. In historical trends, if unemployment flattens off or starts to drop then thats a good indicator that the recession is ending. We haven't seen unemployment start to go down yet.

Unemployment by state for Feb. 2009

Unfortunately there are 7 states with over 10% unemployment. The worst hit are: Michigan 12%, South Carolina 11%, North Carolina 10.7%, Oregon 10.8%, California 10.5%, Rhode Island 10.5% & Nevada 10.1%

In the good news category there are 11 states under 6% unemployment. The best off are: Wyoming 3.9%, Nebraska 4.2%, North Dakota 4.3%, South Dakota 4.6%,Iowa 4.9%, Utah 5.1%, New Hampshire 5.3%, New Mexico 5.4%, Oklahoma 5.5%, Louisiana 5.7%, Kansas 5.9%.

The data is from the Bureau of Labor Statistics. There is a graphic map of the nation with each state's unemployment rate.

Below is the list per state:

State	February 2009
Alabama	8.4
Alaska	8.0
Arizona	7.4
Arkansas	6.6
California	10.5
Colorado	7.2
Connecticut	7.4
Delaware	7.4
District of Columbia	9.9
Florida	9.4
Georgia	9.3
Hawaii	6.5
Idaho	6.8
Illinois	8.6
Indiana	9.4
Iowa	4.9
Kansas	5.9
Kentucky	9.2
Louisiana	5.7
Maine	8.0
Maryland	6.7
Massachusetts	7.8
Michigan	12.0
Minnesota	8.1
Mississippi	9.1
Missouri	8.3
Montana	6.0
Nebraska	4.2
Nevada	10.1
New Hampshire	5.3
New Jersey	8.2
New Mexico	5.4
New York	7.8
North Carolina	10.7
North Dakota	4.3
Ohio	9.4
Oklahoma	5.5
Oregon	10.8
Pennsylvania	7.5
Rhode Island	10.5
South Carolina	11.0
South Dakota	4.6
Tennessee	9.1
Texas	6.5
Utah	5.1
Vermont	7.0
Virginia	6.6
Washington	8.4
West Virginia	6.0
Wisconsin	7.7
Wyoming	3.9

Is job loss insurance worth paying for?

With the economy the way it is, things like unemployment are frequent topics. If you become unemployed through no fault of your own then you can qualify for government unemployment insurance. However unemployment insurance may not t pay a significant portion of many peoples previous paychecks. Apparently there are private forms of unemployment as well which function as a kind of insurance similar to disability insurance.

A private company that offers such insurance is PayCheck Guardian. I couldn't readily find other companies that offer such insurance, but there may be others out there. Looking at the Paycheck Guardian website they make it pretty easy to find their coverage rates and basic details.
The rates for their insurance are : $50 a month for $750 of coverage, $60 a month for $1000 coverage and $70 a month for $1500 coverage. The coverage lasts 4 months. You do have to work 4 months after signing up in order to be eligible. This stops people from hearing about a layoff next week and signing up for the insurance just because they know they'll be laid off shortly. I'm not sure if there are other requirements to qualify or anything so you'd have to dig deeper into the contract to see all the details.

Financially is this a good deal?

For their basic coverage, you're looking at paying $600 a year for $3,000 potential benefit. If we make a guesstimation that there is a 1 in 10 chance of being laid off within a year period. I don't have a good number for that and couldn't readily find statistics about the chance of becoming unemployed in a given time period. But I think 1 in 10 is an OK guess at least for ballpark assumption work. So if the rate of becoming unemployed is 10% then for every 10 people making $600 in annual payments the pay out rate is $3000. The insurance company is taking in roughly $6000 for every $3000 they pay out. Another way to look at it is that the insurance you're paying $600 for is really only worth about $300. The plans with higher coverage work out in similar fashion.

Financially speaking I don't think this kind of insurance is a good buy.


Will they pay claims?

I'd also wonder how easy it is to actually get a payout from this company. I tried finding reviews about them on the web and I couldn't find much of anything. I was able to find that the company operates as Producers Financial Network and they have a BBB rating of A+ with no negative customer complaints in 3 years. They also previously operated as Mortgage Safety Plan. I looked and can't find reviews of that company either. I don't find anything bad about this company. But its hard to say, there isn't much of any review type materials. I would think the BBB rating is a good sign though. I don't see any evidence to think they won't pay claims but its not clear if they've been around enough to be tested much.

What should you do instead then?

A good emergency fund should be your self insurance against unemployment. In today's economy I'd try to build up 6-12 months of living expenses. That may be easier said than done but you have to start somewhere. Diverting $50-$70 a month of your income into an insurance plan will only make it harder to get that emergency fund built.

Other info:
Your Money : Job Loss Insurance
Job Loss Insurance Gains Attention as Recession Grows
Should You Buy Job Loss Mortgage Insurance?

The basics of Unemployment Insurance

Unfortunately there are a rising number of unemployed people right now. As of today the Bureau of Labor Statistics is reporting a 7.2% unemployment rate for December 2008 and its likely risen a bit since then. These people are eligible to receive unemployment insurance. What is unemployment insurance and how does it work?

What is unemployment insurance?

Unemployment insurance is money that you can get paid temporarily after you lose your job. This is not welfare but instead a government run insurance system. Every working person has money paid into the insurance fund to cover the possibility of unemployment. The insurance is funded by payments from working people usually paid by the employer. The unemployment insurance system is managed at the state level and each state runs the programs based on federal guidelines.

Who gets it? How do you get it?

You can normally get unemployment if you've been employed and you lose your job through no fault of your own. That last bit is important. You can not get unemployment if you're fired for cause or if you quit your job. You can get unemployment if you are laid off. In order to get unemployment you have to file a claim with your local state agency. To qualify you may need to meet additional requirements that can differ from state to state. Usually the main thing you have to do is actively look for work and report your job hunting progress to the state. This usually means something like applying for 2-3 openings every week and then letting the state know that you are doing so. They don't want you to just sit in front of the TV and collect a check, the idea is that you are temporarily unemployed and looking for work so you should be looking. But again the details will vary from state to state. There can be other specific requirements that vary by state too. For example you may need to register with a state employment office so they can try and match you with jobs. You might also need to take some form of job hunting or career classes offered by the state. My sister had to take an 8 hour resume writing class once.

How much do you get?

The exact amount of unemployment insurance you get will depend on your wages and the state you live in. The more your wages are then the more your unemployment will be. Every state has a maximum payout. Here is a list of the maximum weekly benefits by state. Most states maximums are in the $300 to $500 range. Looks like the minimum is $210 a week in Mississippi and the maximum is $900 a week in Massachusetts. Of course that doesn't mean you'll get the maximum if you're unemployed, the actual benefit amount is proportional to your wages over the past year in some way. In my state the benefit is roughly 2/3 of your weekly pay up to the maximum. To find out the benefit you might get you could find the unemployment site for your state and see if they have a benefits estimator.

How Long does it last?

Normally unemployment will last 26 weeks. If you get a job first or are otherwise ineligible then payment will stop. Sometimes in when there is high unemployment the government may extend benefits longer. In that case benefits are extended another 13 weeks. In some cases they may add another 7 weeks on top of that. So in total unemployment will last 26 weeks with possible extensions to make it 39 or 46 total. But you should not count on an extension.


So in summary:

• You will normally be eligible to get unemployment insurance if you are laid off.
• Unemployment is ran by each state with each system differing in the specifics.
  
• To get benefits you must file a claim with the state and then meet their ongoing requirements.
• Benefits vary state by state with maximums usually in the $300-400 range but varying from $200 level to $900. The benefit you will get will be proportional to your recent pay rate.
  
• Unemployment normally lasts 26 weeks but might be extended an additional 13 or 20 weeks.

For specifics on your unemployment insurance benefits refer to your individual states unemployment program.


References:
Department of Labor Unemployment fact sheet.