15 ms·

Finally, Private Unemployment Insurance. But Will Anyone Buy It?

70 points by hvo 10y ago

mdorazio 10y ago
This is interesting, but it seems like it would appeal to a different demographic than HN. If you're younger and have highly desired skills in the market, the numbers just don't add up for this. However if you're older and concerned that a layoff might leave you out of work for multiple months, it could make sense. Just playing with some numbers, if you work in "Information" in California and make $100k, you're looking at just over $100/month in payments according to their calculator. Say you get laid off two years from now, you would have paid $2,400 for the insurance. Payments don't kick in for two weeks, and only add $511/week over what normal unemployment would give you, so you would have to remain out of work for 7ish weeks to break even.
- jklein11 10y ago
  I may be cynical but a 2 month job search after being laid off doesn't sound that unreasonable
  - mdorazio 10y ago
    For a large number of people, I totally agree. However for, say, a software developer in Silicon Valley I doubt it would take nearly that long unless they wanted it to. Note that for non-tech industries the monthly premium goes up significantly (+$40 for Leisure and Hospitality, for example), so the break even time gets longer. Interestingly, the numbers seem to indicate that they expect people employed in Public Administration to have the easiest time finding a new job. The premium payments for that are less than half what they are for IT.
    - nbb 10y ago
      > Interestingly, the numbers seem to indicate that they expect people employed in Public Administration to have the easiest time finding a new job. Or that they are the least likely to be laid off in the first place.
- ddt_Osprey 10y ago
  Meanwhile, you'll be paying for 24 weeks of coverage. And, so, 24 times $511 means, the maximum payout is $12,264 in taxable income, so maybe $8,000 in net cash. So, at the 7 year mark (or maybe right now), just start questioning whether a simple, ordinary savings account would have been the better idea. And, oh yeah, you don't get 24 weeks coverage until you've paid for coverage for 6 months. Otherwise, you just get back maybe $600 at best, and then The End. So you'd better have six months living expenses (or a solid job), AND $600 to pay into the policy, before even bothering, otherwise you're still screwed.
  - phonon 10y ago
    > Meanwhile, you'll be paying for 24 weeks of coverage. Actually, premium payments are waived while on claim.
    - ddt_Osprey 10y ago
      No, I just meant in general. Under the circumstances that you're fully employed for 7 or 8 years, and never need to make a claim, the maximum payout is always 24 weeks of unemployment supplements. Therefore, after 8 years, you might have paid more than you'll ever get back, even with incremental raises during that lengthier period of time.
      - phonon 10y ago
        You can lose your job more than once.
        ddt_Osprey 10y ago
        Welly, welly, welly, welly, well.
        phonon 10y ago
        I see your point.
- scarface74 10y ago
  I played with the numbers - for GA for $120,000 for "information". It was $50 a month. Not bad for an extra $785 a week. It would give me some breathing room not to take the first job offer and to be more picky. I might also be willing to stay at a job I like instead of leaving at the first whiff of distress.
csense 10y ago
Assuming insurance companies are profitable, insurance is a -EV bet for the consumer. The only reason to ever buy insurance is if the potential loss would be ruinously large. Gaps in unemployment simply don't generate that kind of huge loss the way a house fire, extended illness or million-dollar lawsuit would. According to numbers earlier in the article, this pays out $536.50 * 24, about 6.7 weeks of pretax wages or 12.9% of your annual income. If you put 10% of your income into an emergency fund, you can build it to the level of the payout from this insurance in a little over a year.
- pdq 10y ago
  I was about to post but saw yours, so I'll reply with basically the same position. ---- This will be a contrarian opinion, but personal insurance, in general is a ripoff. You are taking a monthly bet (ie an insurance policy) against another party that an event will occur. The other party must administer the insurance and also make a profit, so the overall expected return is negative. The only smart reason to get these types of insurance is if you know you can make a claim in the short term (in other words you have insider information that you will be laid off soon). The smarter thing to do is save and build up your own "rainy day" fund, where once you have funded it properly, you no longer have to pay into it.
  - DavidSJ 10y ago
    That's not the same position. You're saying you should get insurance only when EV is positive. Parent is saying you should get insurance only when the insured outcomes would be ruinous, despite negative EV.
  - csense 10y ago
    EV isn't everything; you also have to consider risk. If you put too much of your bankroll on the line, making even repeated high +EV bets will eventually lead to ruin with probability approaching 1. There's another element at play here due to your finite bankroll; that element is usually called "risk." Even though it's -EV, insurance can have a real benefit to the buyer through removing their exposure to otherwise ruinous risk.
  - 10y ago
sjg007 10y ago
Or you know California could just up unemployment to actually cover your lost wages for a few months. 60% is a joke.
- seattle_spring 10y ago
  Is it though? If you pay the taxes on the premiums then the 60% is not taxed. That's more than my take home pay.
- phonon 10y ago
  Actually, the issue the insurance most directly addresses in that case is that CA unemployment benefits max out at $450/w. So people making more, or much more, than ~$50k year would have a very significant income shortfall, as a percentage of income.
wtbob 10y ago
> Those who work in public administration would pay the least: $34.75. That tells you everything you need to know about which jobs are relatively unrelated to merit. > But many people can’t or don’t save enough to add up to the $12,875 or so that IncomeAssure may pay out to a $100,000 earner in New York I don't care who you are: you need to have more than 1½ months' salary saved up. If you don't, your life is going to suck, badly, at some point. Honestly, this seems like a product best used by folks in their first few years of work. If you've been working longer than that, you sure better have better savings.
- fiatmoney 10y ago
  In your first few years of work, you should be structuring your life so that major expenses like car & housing are minimized (you're not used to better, and you likely don't have a family to drive around & frolic in green space) & you can build up a cash cushion. It just seems like there is just no frontier for which this makes sense, other than "person who knows their job is going away at 6mo+1day".
- fleitz 10y ago
  Even then it's way better to save that money... After you save it once you have it forever, and can use it to borrow against. eg. Save it for a down payment, when you buy your place with the insurance money you saved, get a credit card for the amount you used for downpayment, and then rebuild your savings using the credit card for your emergency fund.
gruez 10y ago
The title makes or look like this was recently released, but or says right in the article that the product has been around for 5 years.
fiatmoney 10y ago
It's really odd that their examples are people in the 100K+ range, for whom the benefits are absolutely minimal after you account for the 6 month initial required period & the benefit cap. This is the demographic likely to have both savings to draw on, access to loans (eg a HELoC like the author), family support, ability to fight an eviction or foreclosure... Even in lower income brackets, it's so unlikely to be worthwhile compared to simply saving for the initial 6 months that I'm not surprised that "IncomeAssure has existed for five years, [and] there are about 1,000 active policyholders". “It has been disappointing that we haven’t been able to find a cost-effective way to get the word out that this exists,” Mr. Sterling, SterlingRisk’s chief, said. And here we are; they found their cost-effective marketing campaign for their crappy product. I hope the author got lunch paid for at least.
- phonon 10y ago
  You should not be so cynical. The insurance kicks in to supplement state benefits, for people who would otherwise max out on them (most states give at most around $400/w). So it only makes sense for people at middle or higher incomes. The benefits are not "absolutely minimal". The premiums might be, say $800/y, and the benefits $10,000 if you are unemployed 24 weeks. Is it a lotto ticket? No. But for people afraid of job loss without that amount saved up, do you have a better suggestion?
  - fiatmoney 10y ago
    Yes; take the premiums you would've paid for 6 months (effectively without coverage during that time regardless), save them, and reduce your living expenses to allow you to build up the cash cushion from there. If you're in that income bracket you really should be able to structure your expenses so you can save a decent amount, even in a high-cost city (there are minor exceptions to this, for instance child support obligations, but moving to a shittier apartment or not going out to eat for N months to build up savings is a valid alternative to incurring an extra recurring expense like this if you're living on the margin of insolvency anyway). Unlike these benefits, depleting savings isn't taxable income, and again, in that bracket you might even be able to wrangle in tax-advantaged savings (eg saving in a Roth account that gives you extra option value, converting to a Roth at your now-lower income bracket & withdrawing the principal, withdrawing home equity, etc). Once you figure in the fact that it's paying out effectively 1/4 of your income, after taxes, for 6 months max, minus the state unemployment benefits, it really does look to be a minimal payoff.
SilasX 10y ago
Wait, what? There has long been a kind of private UI: those credit cards that defer interest if you lose your job, for example.
- phonon 10y ago
  Not quite the same thing as getting a check in the mail, is it?
wturner 10y ago
"Let’s say you live in New York and earn $100,000 annually." wtf ? I didn't read the rest of the article after that statement.Too divorced from reality. How about you start with "Let's say you work at a part-time temp agency doing manual labor for $8 an hour and your hours are restricted to 30 hours a week.You are socially trapped at the moment and see no way out" Then the article would be more realistic.
- dajohnson89 10y ago
  Whatever the typical demographic is for an nyt reader, it's not a manual worker making $8/hr.
  - wturner 10y ago
    Ok, you're right. Those people should not be considered. Only "normal people" who make $100,000 a year should be.....and the down votes to this post agree! The real answer to this absurd nonsense is that all this can be done via algorithms to determine who is the biggest liability, which helps these "insurance companies" to choose who to accept and not to accept. This benefits the companies but defeats the purpose of insurance in the first place.
Animats 10y ago
This should be a fringe benefit with startups. After all, the odds are that they will fail.
- scarface74 10y ago
  That would be a great idea. Everyone is saying that you should have an emergency fund - and I agree - but I would rather not have the gap in income that would cause me to use my emergency fund.
sytelus 10y ago
They should really offer this through employers directly (like medical insurance). That can reduce the cost for insurance company as well as employers to offer severances if something goes bad. The key here is events like layoffs at many companies is rare enough that it might make sense to turn this in to severance coverage as opposed to unemployment coverage.
drivingmenuts 10y ago
Why should we? The state seems to be handling that one pretty well. Of course, now that it exists, I live in one of those states which will likely make it mandatory to purchase, because someone, somewhere in the legislature or one of their cronies, will make obscene amounts of money off of it.

70 points by hvo 10y ago

This is interesting, but it seems like it would appeal to a different demographic than HN. If you're younger and have highly desired skills in the market, the numbers just don't add up for this. However if you're older and concerned that a layoff might leave you out of work for multiple months, it could make sense. Just playing with some numbers, if you work in "Information" in California and make $100k, you're looking at just over $100/month in payments according to their calculator. Say you get laid off two years from now, you would have paid $2,400 for the insurance. Payments don't kick in for two weeks, and only add $511/week over what normal unemployment would give you, so you would have to remain out of work for 7ish weeks to break even.

jklein11 10y ago
I may be cynical but a 2 month job search after being laid off doesn't sound that unreasonable
- mdorazio 10y ago
  For a large number of people, I totally agree. However for, say, a software developer in Silicon Valley I doubt it would take nearly that long unless they wanted it to. Note that for non-tech industries the monthly premium goes up significantly (+$40 for Leisure and Hospitality, for example), so the break even time gets longer. Interestingly, the numbers seem to indicate that they expect people employed in Public Administration to have the easiest time finding a new job. The premium payments for that are less than half what they are for IT.
  - nbb 10y ago
    > Interestingly, the numbers seem to indicate that they expect people employed in Public Administration to have the easiest time finding a new job. Or that they are the least likely to be laid off in the first place.
ddt_Osprey 10y ago
Meanwhile, you'll be paying for 24 weeks of coverage. And, so, 24 times $511 means, the maximum payout is $12,264 in taxable income, so maybe $8,000 in net cash. So, at the 7 year mark (or maybe right now), just start questioning whether a simple, ordinary savings account would have been the better idea. And, oh yeah, you don't get 24 weeks coverage until you've paid for coverage for 6 months. Otherwise, you just get back maybe $600 at best, and then The End. So you'd better have six months living expenses (or a solid job), AND $600 to pay into the policy, before even bothering, otherwise you're still screwed.
- phonon 10y ago
  > Meanwhile, you'll be paying for 24 weeks of coverage. Actually, premium payments are waived while on claim.
  - ddt_Osprey 10y ago
    No, I just meant in general. Under the circumstances that you're fully employed for 7 or 8 years, and never need to make a claim, the maximum payout is always 24 weeks of unemployment supplements. Therefore, after 8 years, you might have paid more than you'll ever get back, even with incremental raises during that lengthier period of time.
    - phonon 10y ago
      You can lose your job more than once.
      - ddt_Osprey 10y ago
        Welly, welly, welly, welly, well.
        phonon 10y ago
        I see your point.
scarface74 10y ago
I played with the numbers - for GA for $120,000 for "information". It was $50 a month. Not bad for an extra $785 a week. It would give me some breathing room not to take the first job offer and to be more picky. I might also be willing to stay at a job I like instead of leaving at the first whiff of distress.

csense 10y ago

Assuming insurance companies are profitable, insurance is a -EV bet for the consumer. The only reason to ever buy insurance is if the potential loss would be ruinously large. Gaps in unemployment simply don't generate that kind of huge loss the way a house fire, extended illness or million-dollar lawsuit would. According to numbers earlier in the article, this pays out $536.50 * 24, about 6.7 weeks of pretax wages or 12.9% of your annual income. If you put 10% of your income into an emergency fund, you can build it to the level of the payout from this insurance in a little over a year.

pdq 10y ago
I was about to post but saw yours, so I'll reply with basically the same position. ---- This will be a contrarian opinion, but personal insurance, in general is a ripoff. You are taking a monthly bet (ie an insurance policy) against another party that an event will occur. The other party must administer the insurance and also make a profit, so the overall expected return is negative. The only smart reason to get these types of insurance is if you know you can make a claim in the short term (in other words you have insider information that you will be laid off soon). The smarter thing to do is save and build up your own "rainy day" fund, where once you have funded it properly, you no longer have to pay into it.
- DavidSJ 10y ago
  That's not the same position. You're saying you should get insurance only when EV is positive. Parent is saying you should get insurance only when the insured outcomes would be ruinous, despite negative EV.
- csense 10y ago
  EV isn't everything; you also have to consider risk. If you put too much of your bankroll on the line, making even repeated high +EV bets will eventually lead to ruin with probability approaching 1. There's another element at play here due to your finite bankroll; that element is usually called "risk." Even though it's -EV, insurance can have a real benefit to the buyer through removing their exposure to otherwise ruinous risk.
- 10y ago

sjg007 10y ago

Or you know California could just up unemployment to actually cover your lost wages for a few months. 60% is a joke.

seattle_spring 10y ago
Is it though? If you pay the taxes on the premiums then the 60% is not taxed. That's more than my take home pay.
phonon 10y ago
Actually, the issue the insurance most directly addresses in that case is that CA unemployment benefits max out at $450/w. So people making more, or much more, than ~$50k year would have a very significant income shortfall, as a percentage of income.

wtbob 10y ago

> Those who work in public administration would pay the least: $34.75. That tells you everything you need to know about which jobs are relatively unrelated to merit. > But many people can’t or don’t save enough to add up to the $12,875 or so that IncomeAssure may pay out to a $100,000 earner in New York I don't care who you are: you need to have more than 1½ months' salary saved up. If you don't, your life is going to suck, badly, at some point. Honestly, this seems like a product best used by folks in their first few years of work. If you've been working longer than that, you sure better have better savings.

fiatmoney 10y ago
In your first few years of work, you should be structuring your life so that major expenses like car & housing are minimized (you're not used to better, and you likely don't have a family to drive around & frolic in green space) & you can build up a cash cushion. It just seems like there is just no frontier for which this makes sense, other than "person who knows their job is going away at 6mo+1day".
fleitz 10y ago
Even then it's way better to save that money... After you save it once you have it forever, and can use it to borrow against. eg. Save it for a down payment, when you buy your place with the insurance money you saved, get a credit card for the amount you used for downpayment, and then rebuild your savings using the credit card for your emergency fund.

gruez 10y ago

The title makes or look like this was recently released, but or says right in the article that the product has been around for 5 years.

fiatmoney 10y ago

It's really odd that their examples are people in the 100K+ range, for whom the benefits are absolutely minimal after you account for the 6 month initial required period & the benefit cap. This is the demographic likely to have both savings to draw on, access to loans (eg a HELoC like the author), family support, ability to fight an eviction or foreclosure... Even in lower income brackets, it's so unlikely to be worthwhile compared to simply saving for the initial 6 months that I'm not surprised that "IncomeAssure has existed for five years, [and] there are about 1,000 active policyholders". “It has been disappointing that we haven’t been able to find a cost-effective way to get the word out that this exists,” Mr. Sterling, SterlingRisk’s chief, said. And here we are; they found their cost-effective marketing campaign for their crappy product. I hope the author got lunch paid for at least.

phonon 10y ago
You should not be so cynical. The insurance kicks in to supplement state benefits, for people who would otherwise max out on them (most states give at most around $400/w). So it only makes sense for people at middle or higher incomes. The benefits are not "absolutely minimal". The premiums might be, say $800/y, and the benefits $10,000 if you are unemployed 24 weeks. Is it a lotto ticket? No. But for people afraid of job loss without that amount saved up, do you have a better suggestion?
- fiatmoney 10y ago
  Yes; take the premiums you would've paid for 6 months (effectively without coverage during that time regardless), save them, and reduce your living expenses to allow you to build up the cash cushion from there. If you're in that income bracket you really should be able to structure your expenses so you can save a decent amount, even in a high-cost city (there are minor exceptions to this, for instance child support obligations, but moving to a shittier apartment or not going out to eat for N months to build up savings is a valid alternative to incurring an extra recurring expense like this if you're living on the margin of insolvency anyway). Unlike these benefits, depleting savings isn't taxable income, and again, in that bracket you might even be able to wrangle in tax-advantaged savings (eg saving in a Roth account that gives you extra option value, converting to a Roth at your now-lower income bracket & withdrawing the principal, withdrawing home equity, etc). Once you figure in the fact that it's paying out effectively 1/4 of your income, after taxes, for 6 months max, minus the state unemployment benefits, it really does look to be a minimal payoff.

SilasX 10y ago

Wait, what? There has long been a kind of private UI: those credit cards that defer interest if you lose your job, for example.

phonon 10y ago
Not quite the same thing as getting a check in the mail, is it?

wturner 10y ago

"Let’s say you live in New York and earn $100,000 annually." wtf ? I didn't read the rest of the article after that statement.Too divorced from reality. How about you start with "Let's say you work at a part-time temp agency doing manual labor for $8 an hour and your hours are restricted to 30 hours a week.You are socially trapped at the moment and see no way out" Then the article would be more realistic.

dajohnson89 10y ago
Whatever the typical demographic is for an nyt reader, it's not a manual worker making $8/hr.
- wturner 10y ago
  Ok, you're right. Those people should not be considered. Only "normal people" who make $100,000 a year should be.....and the down votes to this post agree! The real answer to this absurd nonsense is that all this can be done via algorithms to determine who is the biggest liability, which helps these "insurance companies" to choose who to accept and not to accept. This benefits the companies but defeats the purpose of insurance in the first place.

Animats 10y ago

This should be a fringe benefit with startups. After all, the odds are that they will fail.

scarface74 10y ago
That would be a great idea. Everyone is saying that you should have an emergency fund - and I agree - but I would rather not have the gap in income that would cause me to use my emergency fund.

sytelus 10y ago

They should really offer this through employers directly (like medical insurance). That can reduce the cost for insurance company as well as employers to offer severances if something goes bad. The key here is events like layoffs at many companies is rare enough that it might make sense to turn this in to severance coverage as opposed to unemployment coverage.

drivingmenuts 10y ago

Why should we? The state seems to be handling that one pretty well. Of course, now that it exists, I live in one of those states which will likely make it mandatory to purchase, because someone, somewhere in the legislature or one of their cronies, will make obscene amounts of money off of it.