What You Should Know About Unemployment Insurance

March 10, 2014

unemploymentWhen you lose your job, one of the first things you should do is apply for unemployment insurance benefits if you qualify. This is because unemployment benefits can provide you with a bit of income to help your family along while you are without work.

Even if you have an emergency fund, it makes sense to apply for benefits as soon as you can so that you aren’t putting the entire burden of your family’s income on your emergency fund.

Unemployment insurance is paid by employers; you don’t actually pay for these benefits. Your employer pays into a specific fund, and money is accessed by those who meet the requirements for eligibility.

Eligibility for Unemployment Insurance

First of all, it’s important to understand your eligibility. Not everyone who lost a job qualifies for unemployment insurance. Here are some of the things to keep in mind when figuring out if you are eligible for unemployment benefits:

  • How you lost your job matters – You have to have lost your job through no fault of your own. This means that you are laid off rather than fired. If you are fired because of your behavior or due to gross misconduct, such as theft or sexual harassment, you aren’t eligible for unemployment benefits. Additionally, in most cases, if you quit your job you are ineligible. There are times when you can make a case for yourself, such as quitting to escape a dangerous situation at home, or quitting because you need to care for a dependent with a disability. Talk with your state office and your caseworker to determine the possibilities.
  • Employed full-time or part-time in the past – You need to have had a job. If you are self-employed and you lose a major client, you are not eligible for unemployment benefits. You can only collect if you have been employed and you have recently lost your job.
  • An active job search is a requirement for benefits – Usually, in order to keep receiving benefits, you have to show that you are taking steps to find a new job, or that you are in training so that you qualify for a new job. You have to have this training approved.

There might also be other state requirements. Since unemployment benefits are administered through the state, you need to check with your state’s employment department to find out what the requirements are. Often, you need to register with your state’s workforce services agency, and follow instructions.

How Much Can You Get?

The amount of money you receive depends on how your state determines benefits. Usually, the state figures out how much you can get based on how long you have been employed, your salary when you were laid off, and other factors. States also receive aid from the federal government for unemployment benefits, so the amount of aid received also figures into the equation.

You should also be aware that unemployment benefits are not tax free. You are taxed on these benefits as though they are regular income. You can choose to have a portion of your unemployment benefits check withheld for taxes. This is often a good idea, even if it does reduce the amount that you end up with, since it can prevent a burden come tax time.

Understand, too, that in some states, your pension benefit (if your employer offered a contribution) might be reduced.

It’s never fun to find yourself in a position of dependence. However, unemployment insurance benefits are there to help you get back on your feet. Take advantage of them so that your family doesn’t suffer as much while you look for a new job.

What are your thoughts about unemployment insurance? Leave a comment!


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Miranda writes about personal finance almost every day. An experienced freelance writer, she's covered your money online and in print from every angle and is always looking for new ones.

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2 Responses to What You Should Know About Unemployment Insurance

  • Marie Zalbe

    Honestly, I really don’t know that there is an unemployment insurance, but sadly the self-employed are not eligible for that insurance. Does this kind of insurance are available worldwide? For me, it would be very helpful, especially the unexpected job loss.

  • Kevin H @ Growing Family Benefits

    The unemployment laws vary widely by state when it comes to how you lost your job. The American Reinvestment and Recovery Act passed in 2009 and provided incentives to states to “modernize” unemployment to include a compelling family reason. In addition to caring for a sick family member, six states include an employees own disability.