Afraid of Losing Your Job? Consider Mortgage Unemployment Protection Insurance

Joseph Meyer
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Who Qualifies for Unemployment Mortgage Protection?

As financial professionals, we are aware of the benefits of mortgage unemployment protection. A mortgage that is protected by an unemployment plan allows you to make consistent payments and rest easy knowing that you will not go homeless if you are unable to work.

Does your mortgage payment sound like a godsend? Perhaps you should consider an unemployment mortgage policy. But before you do, you should think about the types of mortgages that are protected by an unemployment plan.

The majority of homeowners today have either an adjustable rate mortgage (ARM) or a fixed rate mortgage. While adjustable rate mortgage payments are generally lower than fixed rate mortgages, they can also vary more. Unemployment mortgage plans only protect fixed-rate mortgages.

Additionally, many fixed rate mortgages today offer a teaser rate. The teaser rate is a rate that remains low for the initial period before rising to the market rate. An unemployment mortgage policy will only protect full market fixed rate mortgages, not payment and market teaser rates.

An unemployment mortgage policy will only protect mortgages that are completely yours. So if you have a single or joint mortgage, those on your loan will be protected by the policy. That said, if you live with relatives or your mortgage is in someone else’s name, only you will be protected by the policy.

The unemployment mortgage protection plan also excludes second homes, condos, coop, and mobile homes.

What’s Your Status?

To lose one’s job is bad enough, but to lose your home in the process is a devastating blow. Luckily, insurance companies are now offering specialized unemployment protection insurance combined with a mortgage loan.

Most people take out a loan to buy a house, and they pay the monthly mortgage in case of job loss. However, most home loans have no protection against losing your job. In case of job loss, you can skip the loan payment, but you get no compensation. You’ll probably still have a chance to get another job, but since you haven’t been paying your mortgage, foreclosure proceedings will begin after a certain period of time. Your credit score can take a huge hit, and you may have a hard time renting or buying a home again.

Making a regular monthly mortgage payment is a good habit, and skipping it can be disastrous for you financially. That’s why many people are looking for a way to have job loss protection combined with a mortgage loan.

This specialized protection creates a contingency plan if things go south. You can choose to have the insurance payout used to keep your mortgage payments covered or have the principal amount of your loan paid off so you can get a fresh start. You may also opt to debt consolidation in which you pay off your existing loans and credit cards, and have the insurance payout used as a lump sum to help you start over.

Final Verdict On Mortgage Insurance