To be frank when I see these three words (mortgage unemployment insurance) together, I just don’t see the connection, but you learn something new every day. Over the weekend I read that it may take seven years until we create enough jobs to get back to the level we were at prior to the meltdown in 2008. That being the case, job security is the name of the game. Am I wrong?
So if you think you might be unemployed and looking for a new job, you might consider unemployment mortgage insurance. This is even more important if you want to avoid bankruptcy and foreclosure.
What is unemployment mortgage insurance?
It’s coverage that will pay your mortgage in case you lose your job. You collect if you are laid off or fired without cause. If you quit, retire or get sacked for misconduct, you can’t collect. Also, you can’t collect if you are self-employed.
What happens if I buy the coverage and then lose my job?
There will be a waiting period, usually 30 to 60 days. You have to wait for that period to expire before you collect. At that point, the insurance company starts sending payments directly to your mortgage company while you sit at home watching Jerry Springer on TV – or go out looking for a new job.
How do I buy this coverage?
There are a few ways to buy this insurance. Most people who buy this get a rider on their existing homeowner’s policy. That’s probably going to be your best bet. However, some home builders now offer these policies in an effort to stimulate sales.
What’s the catch?
First, each policy is different, but they typically only pay the minimum amount required to keep your home out of foreclosure. Also, some policies are limited and only pay benefits for six months.
My recommendation:
If your job is on the rocks, it might be a good thing to look into. The cost is probably not high. While this is not a replacement for life insurance, the risk of losing your job is much higher than losing your life. For that reason, I think it’s more important to consider – especially when you compare it to mortgage life insurance.
Innovative use of mortgage unemployment insurance:
If you’re trying to sell your house but all the buyers are afraid of losing their jobs, why not offer to pay for a year or two of this protection? That way they may feel more inclined to sign on the bottom line.
Do you own mortgage unemployment insurance? Why or why not?
Want a Free e-Course and Report on how to invest like a genius?
Just subscribe to Wealth Pilgrim and they are yours for free. Don't waste another day being confused about how investments work or how investment advisors work or how investment advisors work. Take back control of your financial life once and for all - for free!
Click Here to Sign Up For Our Free Newsletter!
Neal Frankle is a Certified Financial Planner™ with over 25 years experience. Subscribe today and tap into this wonderful, free resource!
{ 9 comments… read them below or add one }
Bankruptcy…..very interesting comment.
You bring up an excellent point. Insurance companies are in the business of trading risk for dollars. But having said that, your comment makes me think about the consequences (to all of us) of another insurance scheme that blows up.
Thanks……very intriguing.
Wow, there is just always someone who is innovative enough to come up with something like this. Insurance against you losing your job… What else will they think of next? Insurance against your potential bankruptcy? Remember the whole thing started also because AIG underwrote all these risky insurance policies. Anyway, there is always someone out there who is “smart” enough to find a quick way to make a dollar.
Wow I have never heard of this type of policy. I am curious how much it would cost? Do you have any idea on numbers? What kind of underwriting do they do?
Evan,
Its a rider on homeowners policies. Not sure how much it is but I’m thinking it’s not too much.
I hope you don’t need the coverage though!
Hi Neal, we don’t have this insurance because we don’t own a house. We decided to sell ours in 2006 and have been renting ever since.
Even if we did own one, we would probably skip it for 3 reasons. a) My husband’s software skills are in high demand. b) We have a very large savings cushion. c) Companies often put in loopholes to avoid paying out on policies so you have to read them very carefully. We were cheated on an extended warranty once.
@bankruptcy – You have a great point about systemic risk!
Hi, i am currently not named on my husbands mortgage. Would i have to be named before i can take out mortgage protection insurance?
Lorraine,
This is a very good question. I have no idea — probably best to inquire with insurance agent. Let us know if you find out please.
Hello,
I am interested in purchasing this type of insurance but the bad part about it I am unable to locate companies and phone numbers that offer this service. Can you please provide companies and phone numbers?
Sadly….I don’t. Have you tried looking them up on Google?