Ten Costly Myths About Unemployment Insurance
Be sure you don’t fall prey to the 10 myths people hold about unemployment benefits and insurance:
Myth #1: I’m going to get something out of unemployment insurance because I paid into it.
Truth: Unemployment insurance is paid for primarily through employers’ contributions. You, as an employee, do not pay into any unemployment compensation fund directly.
Myth #2: Unemployment insurance will stay in place until I get a job.
Truth: Unemployment insurance is just that — insurance. It works just like life insurance, auto insurance, and medical insurance, in that there is a maximum payout and you must meet certain conditions to file a claim. In other words, once you have used up your unemployment benefit, you will not receive more money unless you return to work for a period of time and then are laid off again. This is similar to auto insurance — when you are in an accident, your insurance company pays for the eligible amount (the cost of the damage to your car or your medical bills) and nothing more. If your accident costs more than your insured amount, you pay the remainder.
Myth #3: Unemployment benefits will be similar to what I earned when I had a job. Truth: Maximum amounts vary from state to state, but in many cases, the amount you receive in unemployment will be far less than your actual paycheck. Unemployment insurance is not designed to fully replace your paycheck, but to tide you over, temporarily, until you find another job.
Myth #4: Unemployment benefits apply uniformly to everyone, so my friends and I will receive the same amount of money.
Truth: Different circumstances and different answers to the questions used to determine eligibility in your state will cause different outcomes. In addition, some special workers, such as military and federal workers, have different rules that apply to them. So, too, do some people in disaster areas and/or in particular industry segments.
Myth #5: Since I closed my business and am looking for work I’m eligible for unemployment benefits.
Truth: Unless you are in a state that offers voluntary unemployment insurance, and have been paying into unemployment insurance for yourself (as your own employer), you probably won’t be eligible for unemployment compensation.
Myth #6: Unemployment benefits are a form of welfare. So if I need to make sure my mortgage is paid, they’ll help me.
Truth: Unemployment benefits are a form of insurance, just like auto, medical, and life insurance. Your employer pays the premiums, and when and if you are laid off, you can file a claim. How much you receive — in fact, whether you receive anything at all — will depend largely on the rules governing unemployment insurance in your state. (Note, too, that unemployment benefits are taxable income as well — so be sure to report any earnings on your tax return.)
Myth #7: My unemployment benefits will be based on my last paycheck.
Truth: Most unemployment benefits are based on a “base period” which generally includes the past year.
Myth #8: I should rush to the phone as soon as I’m told my job is gone.
Truth: Do file a claim right away if you think you might be eligible. However, before you pick up the phone, visit your state’s web site (such as California’s, at www.edd.ca.gov) to find out what information is needed. You may need to have your previous earning information, employment history, and other personal details handy. Gather this information before you call so you don’t have to call back repeatedly. And, states like California allow you to file online — usually a more convenient option.
Myth #9: I’ll definitely never get unemployment benefits.
Truth: There are so many eligibility rules, different for each of the 50 states and always changing, that you should visit your state’s web site and apply if you think you might be eligible.
Myth #10: I’ll always be eligible for unemployment benefits.
Truth: Don’t assume. Just as there are times when your medical insurance doesn’t cover a procedure, there may be instances where you are laid off, yet ineligible for unemployment benefits.
