Mortgage unemployment insurance can help you keep your home if you're unexpectedly unemployed. It can help you avoid defaulting on your home loan if you face an extended period of unemployment, and it lets you stop worrying about your house and start worrying about finding a job. However, mortgage unemployment insurance isn't for everyone. Do you need it?
Mortgage Unemployment Insurance and Layoffs
Mortgage unemployment insurance is intended to help if you or your spouse is laid off and you're unable to make your monthly mortgage payments. Different mortgage unemployment insurance policies cover different levels of payments. Any degree of coverage is helpful if you or your spouse is laid off, and is especially reassuring in times of economic turmoil. Consider mortgage unemployment insurance if you don't have the reserves on hand to get you through an extended period of unemployment.
A Waiting Period
Most mortgage unemployment insurance policies carry a waiting period during which you can't file claims for mortgage assistance. If your company is downsizing and you worry that you may be laid off soon, it might be too late for you to take out mortgage unemployment insurance. Most mortgage unemployment insurance policies have a waiting period of six months. Do the research ahead of time, and, if your industry is volatile or subject to downsizing, now might be a good time to take out mortgage unemployment insurance. The monthly payments are usually reasonable, and you can always cancel it if the economy stabilizes.
Not Everyone Qualifies
If you work part-time or have seasonal employment, you might not qualify for mortgage unemployment insurance. Unfortunately, mortgage unemployment insurance is also unavailable for self-employed individuals. Before you take out a mortgage unemployment insurance policy, do some research to find out if you qualify. If not, put that money into an emergency savings account to help you weather down times.
Know What You're Getting
Because mortgage unemployment insurance policies vary, it's important to read the fine print and determine how much of your mortgage a policy covers. Some policies pay 100% of your mortgage if you're unemployed, including principal, interest, insurance and taxes. Others pay only 50% of your mortgage or cover only principal or interest.
Some policies have monthly caps and won't pay your full mortgage. Other policies pay principal only, or interest only, and don't cover your insurance or taxes. Mortgage unemployment insurance policies cover your mortgage payments for only so long; common policies cover six or nine months of payments. Understand what type of policy you need before you make the purchase.
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