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. Last Updated: 07/27/2016

Insurance Throws Jobless a Lifeline

Losing your job is no laughing matter. Losing one in a foreign country where your rights are more limited is even less of a joke.

By taking out an income protection policy, you can protect your income if you have an accident or become ill and cannot work, or if you simply lose your job. But how does this work if you are an expat living and working in Russia?

Certain risks resulting in job loss can be insured locally. For example, disability insurance -- also known as permanent health insurance or income replacement insurance -- can be purchased in Russia. It provides for an insured person if he becomes disabled as a result of an accident or illness.

This type of policy provides for a monthly income to be paid to the policyholder and may be paid either as a lump sum or as an annuity.

The period after which the payments start is typically one, three, six or 12 months. The benefits can continue for two years or in some occasions to normal retirement age and are usually limited to a percentage of one's prior salary. Premiums are usually quite modest, but after age 40 they generally jump considerably.

"Usually, they are flat-rate but sometimes can be inflation-linked in payment, not usually before a claim, though," said Douglas Prentice, an independent financial broker.

Boris Korchemkin of the Russian office of AON, a leading global insurance brokerage, said that people should look carefully into a policy's wording to make sure that they fully understand what is and isn't covered.

"Disability resulting from accidental injury is covered by most policies, but disability due to an illness may be insured with a limited number of insurers. Very few insurers also offer coverage for dread diseases, such as AIDS, cancer, etc.," he said.

But before you rush to purchase any disability insurance product, check with your employer first -- it may already be part of your benefits package, especially if your employer is a large Russian or multinational company.

Another policy widely available in most Western countries is redundancy insurance. This is not offered by employers as readily as disability insurance -- even by generous multinational employers -- but if it is available as part of your benefits package, experts recommend that you take it up.

It is important to know that the definition of redundancy is often quite restricted, and that the benefit period, or the length of time you can claim monthly payments, is generally limited to a set period of time following a layoff -- typically two years. You can choose the period of time you want to be covered for, but the longer the period, the more expensive the premiums will be.

Finally, there always remains the option of buying a policy in the West.

"However, you really need to effect such cover before coming to Russia, as underwriters are not keen on these types of risk since the majority of expats requiring such cover do so on an individual basis," Prentice said.

Even if you have such coverage, you should check that it is still valid in Russia, since there are often exclusions, which might mean you will not be covered if you are in Russia for any length of time before a claim.

In Russia, limited-income replacement coverage may not be available except under group schemes offered by large multinational employers, where the insurance company can spread the risk more. Therefore, Prentice advises considering other forms of noninsurance protection, such as building up an investment portfolio, keeping your job options open, and enhancing your contacts and employability.

As the insurance products are often quite complex, expert advice is highly recommended. After all, you need to be absolutely sure that you are covered in Russia and you need to ensure that in the event of a claim the tax authorities will not try to tax any payouts you receive, which can happen if you receive the funds from a nonresident insurance company.

Finally, while any state social security for the jobless is available only to Russian nationals, a foreigner who is legally employed in Russia may have certain benefits available under Russian law, including the Labor Code.

"Generally, if a foreigner loses his job due to the downsizing of the company, the employer will have to pay him three monthly salaries in severance pay," AON's Korchemkin said. "However, depending on your negotiation skills, it may be possible to settle for a longer period and a larger payout with an employer," he added.