Mortgage unemployment insurance is a financial product that is becoming more and more common. In fact, it is built into many mortgages as an added feature and the premium is factored into the monthly premium homeowners pay. Whether it is built-in to your mortgage or you have a separate policy, it is a very wise financial move and it is especially important to understand how these 2 types of insurance work as they are actually quite different. The difference is that the insurance built into your loan (if you have less than 20% equity in your home) is designed to protect the lender in the event that you default on the loan while mortgage unemployment insurance purchased by a 3rd party is typically only used to protect the policy holder if they should become unemployed.
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Mortgage Unemployment Insurance and the Economy
In unstable economic times, you never know when the company you or your spouse are working for may close, downsize or institute layoffs for some other reason. This makes you and your finances very vulnerable. Most people are not financially secure enough to be able to continue to pay their mortgage for a long period of time if they were out of work. Therefore, mortgage unemployment insurance is a very smart move for anyone who needs to work to pay their mortgage.
Prevent Defaulting on Your Loan
When you buy a home, you have all good intentions of paying the mortgage and remaining in the home until you decide to move. Unfortunately, circumstances beyond our control, like involuntary unemployment, can sometimes lead you to the brink of financial disaster.
When faced with tough decisions like whether to feed your family or pay the mortgage, usually feeding the family wins out. This in turn leaves you in a situation of default on your mortgage payment. By buying Job Loss Protection insurance, such situations are not a concern. If you lose your job and it is not your fault, your unemployment insurance plan will kick in and keep up with your mortgage payments so you can focus on other things.
Find Out the Facts
Even though mortgage unemployment insurance is a very useful type of insurance to carry, there are limitations and you should be aware of them before deciding whether or not to invest in such a policy. Most plans have a waiting period before you are eligible for benefits. If you do not have the finances to pay your mortgage during this period you may want to wait until you have enough money in savings before you purchase this additional protection.
Bear in mind that if you are self-employed, work part-time, work for family members, hold a seasonal position, own more than 10% of the shares of the company you work for or receive severance pay, you will not be able to collect job loss protection insurance. You are also ineligible if you lose your job voluntarily. There are a variety of other limitations on your ability to collect mortgage unemployment insurance. Make sure none of them apply to you before you spend money on premiums.
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