Public Versus Private Unemployment Insurance

Many people are eligible to receive unemployment insurance benefits from the state government, but there are private unemployment insurance plans available for purchase, too. Public unemployment insurance rates cover a percentage of your weekly income, while the terms of private unemployment insurance plans can vary. Some private plans are designed to replace your income if you become unemployed. This can be in addition to a public unemployment insurance plan or a substitute for public unemployment insurance if you are not eligible to receive benefits from the government.

• Eligibility for public unemployment insurance benefits depends on where you work. If your employer pays an unemployment tax to the government, you will likely be eligible for benefits. If you are self-employed or work on a contractual or freelance basis, it is unlikely that you will quality to receive unemployment insurance benefits from the government, and you will need to purchase a private plan if you want to secure your income in case of a lay off.
• Both public and private income-replacement unemployment insurance policies require that you are employed or hold the policy for a minimum amount of time before you can receive benefits. If you have a private policy, you must pay premiums on the policy for a limited amount of time. If you want to collect public unemployment insurance, this means that you must be with your employer for the minimum amount of time because the premiums for a public policy are paid by your employer in the form of an unemployment tax.

If you hold a private unemployment insurance policy, you may be able to negotiate the terms, whereas with a public unemployment insurance policy, each state determines its own regulations that apply to everyone. Private unemployment insurance offers more options for different types of plans, too. For example, you can purchase private unemployment insurance to cover loan payments for a car, a mortgage, or credit card. You can also adjust your rates for private unemployment insurance so that your premiums and potential unemployment checks are appropriate for your budget.

Neither public nor private plans last forever. Whether you receive unemployment benefits from the government or through a private plan, you will only be able to receive these benefits for a maximum amount of time set forth either in your policy or by your state.