There is a difference between unemployment insurance (part of the New Deal's Social Security Act) and “wage insurance,” apparently a little-known private coverage sold by banks and some insurers (“IncomeAssure”) that applies to the difference between what a worker over 50 was earning before his or her job was eliminated by technology or sent overseas, as long as that job had been paying $50,000 a year or more.
The insurance money can be used to re-train the employee for different work, or simply pay the difference in wages, reported Robert J. Shiller in the March 13 New York Times, citing a study by Lori G. Kletzer of Colby College and Robert E. Latan of the Council on Foreign Relations. As state unemployment benefits are limited, such policies can pay up to 50 percent of a higher income worker's prior wages before unemployment.
It is a form of financial guarantee insurance. The insurance industry was badly burned in the “credit default swap” coverages it wrote before the sub-standard mortgage bubble burst in 2008. The unemployment peril (like all the social insurances offered by government, including, unfortunately, flood insurance) is uninsurable. The maximum exposure cannot be defined, there would be adverse selection, and in a real economic disaster — something akin to the Great Depression — there would be no way to control or reduce loss.
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