Unemployment Insurance: What You Need to Know

ByAngelique Cruz

Updated: December 8, 2023

Edited byAliha Strange
ByAngelique Cruz

Updated: December 8, 2023

Edited byAliha Strange

Advertising & Editorial Disclosure

Unemployment insurance (UI) is a program designed to offer temporary financial support to those unemployed. Unemployment insurance is a jointly-owned program of the state and federal governments. Although individual states implement their own requirements, they all follow the same general guidelines.

Remember, not everyone who loses their job qualifies for UI. If you are eligible, expect to receive an amount equivalent to a portion of your total earnings. The state will look at the last 52 weeks. On average, states payout for about 26 weeks.

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How Does Unemployment Insurance Work?

There are many tools to help you be more financially sound, such as budgeting and making logical investments. However, the challenges become different when you try to manage your money while unemployed. Not having a steady income can minimize flexibility and options.

The Federal Unemployment Tax Act of 1939 began unemployment insurance. The federal and state governments have a jointly-owned program that provides temporary financial support to help people who’ve lost their jobs through no fault of their own. This includes the downsizing of an organization or company bankruptcy.

Each state has its specific eligibility requirements and payout periods, but they all follow the same guidelines set by the federal government. However, you can generally claim benefits for up to 26 weeks. It allows you to get a portion of your annual wages as a weekly stipend.

Federal Unemployment Tax Act (FUTA)

We know the Federal Unemployment Tax Act (FUTA) funds unemployment insurance. But where does the money come from?

FUTA requires all businesses with employees to pay a payroll tax. Organizations owe FUTA tax on the first $7,000 they give every employee as their salary in a calendar year.

The 2022 FUTA tax rate is at 6%. The organization remains responsible for determining how much of the $7,000 it has paid each quarter. Remember, FUTA only affects the business — deductions are not taken from the employees' wages.

Eligibility Requirements

Although all 50 states and the District of Columbia administer unemployment insurance, it doesn't mean everyone who doesn't have a job is eligible.

Understanding when you can file a claim to receive temporary support is crucial. Since every state implements a version of the program, requirements may vary between locations.

MoneyGeek highlights these below.

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HELPING YOU GET BACK ON YOUR FEET

Losing a job can be a major blow to you and your finances — and finding work elsewhere can take time. Fortunately, some government agencies provide assistance in this area.

Their services include the following:

  • Informing you of training programs that may help upskill you
  • Resume writing, practice interviews and other training during the recruitment process
  • Advising you of any job openings (in your area or, if you're relocating, to where you're moving)

Although government agencies don't guarantee jobs, they can increase your chances of getting hired and starting a new career.

Duration of Benefits

Now that you have a better understanding of what unemployment insurance is, let's look at the benefits provided. Specifically, how long you're eligible to receive them. Remember, the main objective of UI is to provide financial support, but only temporarily.

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DID YOU MOVE STATES AFTER LOSING YOUR JOB?

You should file your UI claim in the same state where you worked. However, sometimes people decide to move after comparing the cost of living between states. Your current state's UI agency can give information on filing a claim in another state if you moved or worked in multiple areas.

Staying Eligible for the Program

Although the payout period of each state is different, most have a maximum of 26 weeks. Ideally, you should be able to obtain new employment within this time frame. However, that's not always the case. In some situations, you may need more time.

To ensure you remain eligible for unemployment insurance, do the following consistently:

  • Continue to file claims (you may have to do this weekly or bi-weekly, depending on your state)
  • Actively seek employment and remain eligible (and ready) to work
  • Report earnings, job offers (and those you declined) each week
  • Make a physical appearance at the claims office or American Job Center if requested

Remember, your state may have other eligibility requirements. Gather the information specific to your state to avoid any issues or delays to your benefits.

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Scenarios Where You Could Be Denied Unemployment Insurance

Besides not meeting your state's eligibility requirements, several situations may disqualify you from receiving unemployment benefits. It's best to know what these are if you want to receive unemployment insurance.

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Unemployment Insurance During COVID-19

The arrival of COVID-19 was a game-changer. It increased unemployment from 6.2 million in February 2020 to 20.5 million in May 2020. As a result, former President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020.

It gave way to the following benefits for individuals who lost their jobs due to the pandemic:

  • Federal Pandemic Unemployment Compensation (FUTA): This benefit allowed unemployed workers to receive an additional $600 per week. Its first incarnation ran until July 25, 2020, after which it expired. On December 26 of the same year, policymakers readjusted the benefit to an additional $300.
  • Pandemic Unemployment Assistance (PUA): It expanded the population that qualifies for unemployment insurance. This way, individuals who previously couldn’t file a claim found a way to receive unemployment benefits. These included freelancers, self-employed workers and independent contractors — even those who didn't meet wage and work duration requirements qualified for assistance.
  • Pandemic Emergency Unemployment Compensation (PEUC): It extended the payout period after individuals maximized the typical unemployment benefit.

The following administration under President Biden gave way to the American Rescue Plan, a modification and extension of the CARES Act. It expired in September 2021.

Unemployment Insurance FAQ

Although MoneyGeek hopes that unemployment is not a season you have to experience, it's essential to understand how it works and how to stay financially stable until re-employed. We gathered commonly asked questions on this subject. These answers may help you during unemployment.

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Related Content

Unemployment is a challenging place to be in. Try to remember that it is temporary. Fortunately, plenty of resources online can help you manage your circumstances better.

About Angelique Cruz


Angelique Cruz headshot

Angelique Cruz has been researching personal finance for three years, with expertise in macroeconomics, financial statistics and behavioral finance. After a decade-long stint as a management consultant creating professional and personal development programs, she now specializes in writing informative content around personal, auto and home loans. Angelique has a degree in psychology from the Ateneo de Manila University.


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