Do You Need Unemployment Mortgage Insurance?
Even in a healthy economy, no job is completely secure. A mortgage is a long-term financial commitment that relies on a steady income to maintain. Do you know what would happen to your home if you lost your job? How could you avoid losing your home as well?
Some insurance companies now offer unemployment mortgage insurance policies (not to be confused with mortgage LIFE insurance) that pay all or part of the monthly mortgage payment in the case of a job lay off, providing homeowners with some security that they won’t lose their homes while unemployed. These types of policies allow homeowners the necessary time to get back on their feet after loss of a job, although policies do vary on how many payments they will make, and over what period of time. For instance, some will make six monthly payments during a 12-month period, but others will make up to 12 payments.
These policies are especially useful for first-time home-buyers who often deplete their savings in order to afford their homes. However, anyone who fears potential job loss may want to purchase a policy, and almost anyone who has a mortgage can qualify for this type of insurance. To determine whether you need mortgage protection, ask yourself how you would pay your mortgage without the income from your job. Another important consideration is the length of your mortgage; if you only have a couple of years before your mortgage is paid off, you likely won’t need an insurance policy. Also, can you afford to pay the monthly insurance premiums?
The homeowner’s choice of policy will depend on his or her individual needs, including the job situation, amount of the monthly mortgage payment, amount of savings on hand, and a number of other factors. The insurance company will consider these issues as well in determining what type of policy the insured qualifies for. To find the right policy for your needs, be sure to compare rates and policy features at multiple companies, and take the time to ask questions.
Generally, unemployment mortgage insurance policies come with stipulations. First, you must be unemployed for a pre-specified period of time, usually at least 30 days, before the policy begins paying. Most have maximum benefits, meaning that if you have a high monthly mortgage payment, not all of it may be covered. Many pay only principal and interest on your loan, leaving the insured to pay the tax and insurance portion. Also, policies are typically only available to individuals with permanent, full-time employment, not those whose jobs are only temporary or seasonal.
Unemployment mortgage insurance may not be for everyone, but for those worried about potential job loss in unstable economic times, such policies can offer needed financial protection as well as peace of mind.
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