What is Unemployment Insurance?

Updated on May 24, 2023

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Unemployment insurance definition and meaning

Unemployment insurance is a program run by individual states and overseen by the US Department of Labor. It provides temporary income to people that experience involuntary unemployment or job loss.


More about unemployment insurance

Unemployment insurance (UI) programs are only available to workers who experience joblessness by no fault of their own, and who have met a specific base period and earnings requirements. UI provides cash stipends to unemployed workers who actively seek employment. They are typically financed through payroll taxes on employers, though some states do require that employees contribute to the program.


When the Social Security Act of 1935 was signed into law, it established this new type of insurance program that would be administered by both federal and state laws. While UI directly helps individuals endure the economic hardship of unemployment, it’s important to remember that it also helps to stabilize the unemployed worker’s community, too, by subsidizing consumer spending during an economic downturn.


Who oversees the Unemployment Insurance program?

It is the responsibility of the US Department of Labor and the respective state agencies.

Using unemployment insurance in a sentence

“I never thought I’d need to collect unemployment insurance, but when my company closed its US division and laid me off, I was glad to be able to take the time I needed to find another job in my field.”

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