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The Potential Value Of Mortgage Unemployment Insurance

19 July 2016 by Albane Francois

Mortgage unemployment insurance – also known as job loss mortgage insurance – is coverage you buy that will pay your mortgage payment if you lose your job through no fault of your own. If your company is downsizing and you think your job may be in jeopardy, the coverage offers you some financial protection. Even if you don't expect to lose your job, with a constantly changing economy, the availability of mortgage unemployment insurance can give you added security as a homeowner.

Reasons to Buy the Insurance

Investing in mortgage unemployment insurance may help you to avoid bankruptcy or foreclosure in the future if you lose your job. Whether or not your job seems secure, having the insurance may help you feel more protected.

It also can be an incentive that helps sell your home. Offering to pay for the insurance for a certain length of time may attract prospective homebuyers who are hesitant to commit. Even if you don't offer to cover the cost, homebuyers – particularly those who live on tight budgets – may want to purchase the insurance for themselves.

Where to Buy the Insurance

Although some home builders and realty associations offer mortgage unemployment insurance, generally, insurance companies offer the coverage as an endorsement you add to your current home insurance policy. However, not all insurers offer the coverage. But those that do differ in the terms they offer.

What to Look For

Policies that give you coverage if you lose your job normally limit the total number of months for which they pay benefits. Many policies also set a limit on the maximum monthly amount they will pay each month – often the minimum amount of money required to keep the lender from foreclosing on your home. Not all insurers pay your full mortgage payment.

Insurance companies also usually impose a mandatory waiting period after you buy coverage before you can begin to collect benefits. The length of the waiting period varies among insurers. But provided that you lose your job after the waiting period has passed, the insurance company then forwards payments directly to your mortgage lender.

Besides the benefits they provide, policies vary widely in the cost of premiums. Paying a higher premium doesn't necessarily mean that you'll be getting more coverage; therefore, compare quotes and terms from more than one insurer, like Doolin Security Savings Bank, before buying a policy.

Job Losses That Don't Qualify

Mortgage unemployment insurance won't pay your mortgage if you quit your job, retire, or get fired for something you did wrong. Since the purpose of the insurance is to help you out with your mortgage payments if you get laid off from your job, it won't cover job losses due to seasonal or temporary employment, quitting your job because of health problems, or an expired contract that the insurer doesn't consider involuntary. The insurance also isn't available to self-employed individuals or those enlisted in the military.

Alternative Options to Consider

Other options you can pursue for mortgage assistance to protect your home if job loss occurs – particularly if you don't qualify for mortgage unemployment insurance – include:

1. Private mortgage insurance (PMI). Some PMI policies include job loss protection for a specified period of time.

2. Payment protection through your mortgage lender. At the time that you finance your mortgage loan, you may have the option of purchasing job loss protection as part of your loan package.

3. Claim advance. Your mortgage insurer may temporarily pay your mortgage payments so that you can avoid foreclosure.

4. Disability insurance. This type of insurance provides you with an income if you become disabled and unable to continue working – even if only temporarily.

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