Is the contribution towards Employment Insurance (EI) wasted if I never get fired? I ask this because most life insurances have a policy of a payout at certain intervals. Does anything like that happen for EI?
Sorry, even if you never file a claim for Employment Insurance (EI), you don't get your premiums back.
So, yes, if you paid into EI and never filed a claim, your contributions are, as you put it, "wasted" – insofar that your premiums provided no direct benefit to you.
However, your premiums may have provided a benefit to society, perhaps even your previous colleagues. Yet, some would point out that a good chunk of EI premiums are likely wasted on excessive administration of the program itself. That's government.
A couple of cases I'm aware of where you may be refunded some of the EI premiums paid are:
- if you overpaid your premiums in a particular year (for instance, if you had two jobs and each withheld, you may go over the annual premium limit), or
- if you paid premiums when you wouldn't actually be eligible to collect, e.g. if you were employed in a family member's business. Many people don't realize if you work for a family member you're ineligible to claim.
Meaning, a legal way to avoid paying into the EI system altogether is to run your own business. Of course, you won't be able to file an EI claim if your business evaporates overnight. Other kinds of claims unavailable to those who don't pay into EI include maternity, parental*, and sickness benefits .. although they recently made some changes to permit the self-employed to opt-in for some special benefits.
* except in the province of Quebec, where there is a separate Quebec Parental Insurance Plan (QPIP) that also covers the self-employed.
Actually, most insurance policies DON'T have a cash value if you don't make a claim.
The reason that some life insurance policies do this is that they are really tax sheltered investments posing as insurance.
With that in mind, the root of your question is really whether insurance premiums are wasted if you never make a claim. It really makes no difference if you are talking about EI, Auto, or Homeowner's insurance.
My answer to that is no. What you are paying for when you buy insurance is financial risk avoidance. Look at it this way, you don't buy EI as an investment where you hope to get a return on your investment. You are buying the right to be protected against catastrophic financial difficulty associated with losing your job. Whether you claim it or not you did receive that protection.
This is what drives me so crazy when I hear people talk about how an insurance company is ripping you off because you paid more in premiums than they paid out in benefits. Of course you did! If most people didn't pay in more than the company paid out there would be no financial interest for someone to form an insurance company.
It is not wasted: it bought you peace of mind. Perhaps you would have had peace of mind without it, because of the particular industry you are in. But people from any industry can get sick or give birth, and not all industries are as evergreen as people think. A number of my onetime programmer colleagues now drive a truck or run a farm because new programming jobs weren't as easy to get as they once were.
Like any insurance, it can't be affordable if it is bought only by those who think they will need it. The premiums you pay, in addition to giving you peace of mind, lower the premiums your neighbours pay. That contributes to social harmony. When your neighbours collect EI while looking for another job, they aren't tempted to turn to crime or legal-but-not-savoury ways to earn money. You probably like that, too. The fact they didn't get to choose whether or not to contribute means that they will be covered even if they aren't prudent and forward-looking people, which again is a benefit for you.
And BTW, employers pay $1.40 in premiums for every dollar you pay. And we never collect. It's not for us. But we pay it.
I would suggest they are not wasted because your premiums fund unemployment insurance, which is a net to prevent people from going under if they lose their jobs.
Unemployment insurance is in many ways an incubator for success because it allows an entrepreneur to take more risk in starting a business because failure won't mean devastation.
Perhaps that person who took the risk because of the ability to fail started the business that you now work for.
Society works better (in my opinion) by keeping the bottom closer to the top. Paying into the unemployment insurance fund indirectly provides you opportunity.