UNITRIN, INC. SEVERANCE PLAN

Exhibit 10.16

UNITRIN, INC.

SEVERANCE PLAN

Unitrin, Inc. (the “ Company ”) adopted the Unitrin, Inc. Severance Plan (the “ Plan ”) effective January 1, 2002 for the benefit of certain employees of the Company and its Subsidiaries and Affiliates, on the terms and conditions hereinafter stated. The Plan is being amended and restated as of January 1, 2009.

The Plan, as set forth herein, is intended to help retain qualified employees, maintain a stable work environment and provide economic security to certain employees of the Company and its Subsidiaries and Affiliates in the event of a Qualifying Termination following a Change in Control. The Plan, as a “severance pay arrangement” within the meaning of Section 3(2)(B)(i) of ERISA, is intended to be excepted from the definitions of “employee pension benefit plan” and “pension plan” set forth under Section 3(2) of ERISA, and is intended to meet the descriptive requirements of a plan constituting a “severance pay plan” within the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations, § 2510.3-2(b).

Section 1. DEFINITIONS. As hereinafter used:

1.1 “ Affiliate ” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

1.2 “ Annual Compensation ” shall mean:

(a) with respect to a Severed Employee who was a salaried employee immediately prior to his or her Qualifying Termination, such Severed Employee’s rate of annual base salary as in effect immediately prior to such Severed Employee’s Qualifying Termination, without regard to any decrease in such salary constituting Good Reason;

(b) with respect to a Severed Employee who was compensated primarily based on commissions immediately prior to his or her Qualifying Termination, the total commissions earned by such Severed Employee with respect to the 12 full calendar month period ending immediately prior to such Severed Employee’s Qualifying Termination, without regard to any decrease in the rate of such commissions constituting Good Reason;

(c) with respect to a Severed Employee who was compensated based on an hourly rate of pay immediately prior to his or her Qualifying Termination, the total hourly wages earned by such Severed Employee with respect to the 12 full calendar month period ending immediately prior to such Severed Employee’s Qualifying Termination, without regard to any decrease in the Severed Employee’s hourly rate of pay constituting Good Reason;

1.3 “ Beneficial Owner ” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

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1.4 “ Board ” shall mean the Board of Directors of the Company, or any successor thereto.

1.5 “ Cause ” shall mean, with respect to a termination of the Employee’s employment with the Employer, (a) fraud, misappropriation of or intentional material damage to the property or business of the Company (including its Subsidiaries and Affiliates), which in any such case is materially injurious to the Company (including its Subsidiaries and Affiliates), monetarily or otherwise, or (b) the conviction of the Employee for the commission of a felony.

1.6 A “ Change in Control ” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

(a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below; or

(b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

(c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which results in the directors of the Company immediately prior to such merger or consolidation continuing to constitute at least a majority of the board of directors of the Company, the surviving entity or any parent thereof or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) representing 25% or more of the combined voting power of the Company’s then outstanding securities; or

(d) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board

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immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or any parent thereof.

1.7 “ Code ” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

1.8 “ Employee ” shall mean any person who is employed by the Employer on a full-time basis (as determined under the Employer’s policies) and whose compensation is reported on a Form W-2, excluding any Employee who has an individual severance agreement that provides for benefits in connection with a Change in Control. For purposes of the Plan, an Employee shall be considered to continue to be employed by the Employer on a full-time basis during sick leave, military leave or any other leave of absence approved by the Employer.

1.9 The “ Employer ” of an Employee shall mean the Company or any Subsidiary or Affiliate of the Company by which such Employee is employed.

1.10 “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.11 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

1.12 “ Good Reason ” shall mean any action taken by the Employer which results in a material negative change to the Employee in the employment relationship, such as the duties to be performed, the conditions under which such duties are to be performed or the compensation to be received for performing such services. A termination by the Employee shall not constitute termination for Good Reason unless the Employee shall first have delivered to the Employer written notice setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than 90 days after the occurrence of such event), and there shall have passed a reasonable time (not less than 30 days) within which the Company may take action to correct, rescind or otherwise substantially reverse the occurrence supporting termination for Good Reason as identified by the Employee.

1.13 “ Level I Employee ” shall mean any Employee who is primarily compensated by commissions with at least three continuous years of service with the Employer as of the date of such Employee’s Qualifying Termination.

1.14 “ Level II Employee ” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is greater than $150,000.

1.15 “ Level III Employee ” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is at least $100,000 and not more than $150,000.

1.16 “ Level IV Employee ” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is at least $50,000 and less than $100,000.

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1.17 “ Level V Employee ” shall mean any Employee who is not primarily compensated by commissions and whose Annual Compensation is less than $50,000.

1.18 “ Payment Date ” means, with respect to a Severed Employee, the March 15 ^th that next follows the calendar year in which the Severed Employee’s Severance Date occurred.

1.19 “ Person ” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (a) the Company or any of its Subsidiaries or Affiliates, (b) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries or Affiliates, (c) an underwriter temporarily holding securities pursuant to an offering of such securities, (d) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, (e) any individual, entity or group whose ownership of securities of the Company is reported on Schedule 13G pursuant to Rule 13d-1 promulgated under the Exchange Act (but only for so long as such ownership is so reported) or (f) Singleton Group LLC or any successor in interest to such entity.

1.20 “ Plan Administrator ” shall mean the committee appointed to administer the Plan. Such committee shall be selected by the Board. Following a Change in Control, a person may be appointed to such committee only by a two-thirds majority of the individuals who were members of the Board immediately prior to such Change in Control.

1.21 A “ Potential Change in Control ” shall be deemed to occur in the event that (a) the Company enters into an agreement, the consummation of which would result in a Change in Control, (b) the Company or any Person publicly announces an intention to take or to consider taking action which, if consummated would constitute a Change in Control, (c) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or any of its Subsidiaries or Affiliates) or (d) the Board adopts a resolution to the effect that, for purposes of the Plan, a Potential Change in Control has occurred.

1.22 “ Qualifying Termination ” shall mean a termination of an Employee’s employment during the 2-year period immediately following a Change in Control, either (a) by the Employer without Cause or (b) by the Employee for Good Reason. A termination of employment will not be deemed to have occurred upon (i) the transfer of the Employee to employment with a Subsidiary or Affiliate of the Company or (ii) the divestiture of a business with which the Employee is primarily associated if the Employee is offered comparable employment by the successor company.

1.23 “ Severance Benefits ” shall mean the payments and benefits provided to Severed Employees pursuant to Sections 2.1, 2.2, and 2.3 hereof.

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1.24 “ Severance Date ” shall mean the date on which an Employee incurs a Qualifying Termination.

1.25 “ Severance Weeks ” means, for each Employee, one week for (a) each full year such Employee has been continuously employed by the Employer, plus (without duplication), if there has been a break in such Employee’s employment with the Employer, (b) each full year of employment for which such Employee has received credit under any retirement plan or program maintained by the Employer for employment prior to such break, but in no event less than four (4) weeks or more than twenty six (26) weeks (thirteen (13) weeks in the case of a Level I Employee). For purposes of calculating an Employee’s full years of employment, (x) any partial year of employment of at least thirty five (35) weeks shall count as a full year of employment and (y) employment at one Employer shall count (without duplication) toward the number of years of employment at another Employer, provided that (i) there is no break (other than as the result of vacation or sick leave, military leave or other approved leave of absence) in the employment between the two Employers or (ii) such Employee has received credit under any retirement plan or program maintained by the Employer for such years of employment prior to such break.

1.26 “ Severed Employee ” shall mean an Employee who has incurred a Qualifying Termination.

1.27 “ Subsidiary ” shall mean any entity at least 50% of the voting securities of which are Beneficially Owned by the Company.

Additional definitions are set forth within the Plan and shall have the meanings ascribed to them in the Plan.

Section 2. BENEFITS.

2.1 The Company shall pay (or shall cause the Severed Employee’s Employer to pay) to each Severed Employee a severance payment (the “ Severance Payment ”) equal to:

(a) in the case of a Level I Employee, the product of (i) one-fifty-second (  ¹ / 52 ) of his or her Annual Compensation and (ii) his or her Severance Weeks.

(b) in the case of a Level II Employee, one year’s Annual Compensation plus the product of (i) one-fifty-second (  ¹ / 52 ) of his or her Annual Compensation and (ii) his or her Severance Weeks.

(c) in the case of a Level III Employee, thirty-five-fifty seconds (  ³⁵ / 52 ) of his or her Annual Compensation plus the product of (i) one-fifty-second (  ¹ / 52 ) of his or her Annual Compensation and (ii) his or her Severance Weeks.

(d) in the case of a Level IV Employee, seventeen-fifty seconds (  ¹⁷ / 52 ) of his or her Annual Compensation plus the product of (i) one-fifty-second (  ¹ / 52 ) of his or her Annual Compensation and (ii) his or her Severance Weeks.

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(e) in the case of a Level V Employee, the product of (i) one-fifty-second (  ¹ / 52 ) of his or her Ann