Whether a result of unexpected downsizing, an acquisition or changing dynamics in the workplace, layoffs can come with little warning. In the interest of always being prepared, you may be looking for some type of safety net of emergency cash, in the event you get laid off. For some people, mortgage unemployment insurance may be a good option.
What is mortgage unemployment insurance?
Simply put, mortgage unemployment insurance will pay your mortgage if you are laid off or fired without cause. The purpose is to keep your home out of foreclosure while you are looking for work. Keep in mind that you probably won't be able to collect a dime if you quit or are fired due to misconduct. And in most cases, you can't collect if you are self-employed. Coupling this insurance with other ways to stretch your family budget could help to keep your family's financial future intact.
How do I get coverage?
Generally, you can buy this coverage as a rider on your homeowner's policy, although it can also be offered as a supplemental commercial policy through a broker.
How long will I have to wait to get the emergency cash needed to make my mortgage payments?
Depending on your policy, you may be subject to a waiting period ranging anywhere from 30 to 90 days. So before your benefits kick-in, you'll have to wait until that certain time period has expired. Keep in mind that your payments will be sent directly to your lender - not to you. Also, some policies are limited in the fact that they'll only pay benefits for six months.
If you're laid off from work, it can be difficult to meet financial obligations such as mortgage payments, on state unemployment benefits alone. Although state unemployment systems are designed to replace about 50% of a worker's lost income, they can be capped at a fixed dollar amount that varies by state. The fact is, a job loss often comes without warning. If you find yourself fearful of being laid off and having the emergency cash to make your mortgage payments, then you may want to consider mortgage unemployment insurance.
For information on budgeting as well as covering your mortgage with mortgage life insurance, visit the Protective Learning Center.