Several pieces of evidence are interpreted as if workers search on-the-job to prevent a layoff, so that it is not unusual they accept wage cuts when moving to new jobs. We conceptualize this behavior as a self-insurance mechanism obtained by exerting effort. Since on-the-job search insures against idiosyncratic risk unlike assets, it helps understand limited participation in asset markets. We formalize these intuitions by constructing an economy with idiosyncratic dismissal shocks and costly on-the-job search. Workers may use on-the-job search not only as a mechanism to climb the wage ladder, but also to avoid future bad shocks and hence, on-the-job search acts as an insurance mechanism. We show that consumption evolves according to a standard Euler equation in which current effort impacts the income distribution tomorrow. We solve and calibrate the model to assess its quantitative empirical performance.