When you no longer have a paycheck to rely on, you may turn to unemployment insurance for an income while you search for another job. Though the weekly benefits you receive are only a percentage of what you earned previously, they can help tide you over. Still, you may wonder if a lump sum payment wouldn't make it easier for you to budget. But the unemployment insurance system isn't set up to make lump sum payments.
Who Pays for Unemployment Insurance
Payments from employers finance the unemployment insurance system. Your former employer paid a premium for each of its employees every pay period, up to a set amount each year. This payment was in addition to your wages and was not deducted from your wages. The money goes to the state, with a small amount to the federal government. The collected money from all employers funds payments to those receiving benefits. Unlike a savings account, the money doesn't accumulate. It waits for you until you're unemployed.
How Benefits Are Figured
When you file for unemployment benefits, you must list every company you worked for in the previous year to 18 months, depending on the rules in your state. The unemployment commission verifies your employment with these companies and looks at the wages you earned while working. Usually, the commission looks at your wages in the first four of the last five quarters you worked, not including the quarter in which you file for benefits. Your highest earnings in two of those quarters help determine the weekly benefit you'll receive. The commission will send you a form showing you the amount you can expect to receive in benefits each week. The form may also show a total of benefits you may collect. The commission arrives at this figure by taking the number of weeks you could collect a full benefit check on regular unemployment — usually 26 weeks — and multiplying that by your weekly benefit. This figure may look like an attractive lump sum, but it's only a prediction of the benefits you may receive, not the benefits you will receive.
Qualifications for Benefits
In order to receive a weekly unemployment benefit check, you must file a claim each week. On the claim, you're asked about your attempts to find work and about any income you received from work during the week, and any days you weren't available to work. States require you to look for work every week while you're unemployed, and you have to be ready, willing and able to take a job if you're offered one in your field. If you earn any money from temporary jobs or self employment, you have to report these earnings. The earnings reduce the amount of your benefit check for that week. Some states deduct the entire amount you earn from your check, while other states exempt part of that money. So some weeks you could receive a partial check. This means that, though the length of time you could collect a full check is 26 weeks, if you have weeks where you only collect partial benefits, this extends the time you could receive a check. You can collect regular unemployment until you use up that total benefit reported on your benefits determination.
Why No Lump Sum
The unemployment commission pays a benefit check for every week you're out of work. Once you return to work, your benefit checks stop. You may have money left in that total sum reported on your benefits determination. If you find yourself unemployed again in a few weeks or months, that money is still available to you. If you never need it again, it's available to other unemployed people. The money was never specifically earmarked for you; it was merely the possible total of regular unemployment benefits available to you if you needed them.