Mortgage unemployment insurance is sometimes known as job loss mortgage insurance. Those of us who have been fortunate enough to purchase homes have been offered mortgage insurance better known as credit life. This protection insurance protects the buyer in the event of loss of life. In which case, the mortgage is paid off. Job loss insurance protects us in the event of loss of employment.
The Basics of mortgage unemployment insurance may not be self explanatory because one might think; OK, my mortgage will be paid every month until I obtain work again. You might also think that it will pay 100% of the mortgage payment; however, these assumptions are a bit premature.
The fact is, there are several prerequisites to filing a claim. Some of the contingencies state that the job loss has to be involuntary. A person can’t just quit his or her job and file a claim. Disability is a justifiable claim. Most companies require that the insured have the policy at least six months before a claim can be filed.
Every worker is not eligible for job loss protection insurance. Self employed individuals and seasonal or temporary workers are not eligible. Labor union employees may be able to file a claim during strikes. Currently there are no laws available making it up to each provider.
The Cost of Mortgage Unemployment Insurance
People over 40 may remember companies that offered this type of insurance such as Household Finance, Beneficial, and Citigroup. Many people started to realize that the basic concept behind this insurance contributed to sub prime lending. The cost was just too high for an insurance policy buyers rarely benefited from. Especially, with the cost of the premium sometimes collected at closing. This was known as the single premium credit life.
These companies are today known as Household International and CitiFinancial. Associates First Capital Corporation was acquired to improve the lending process after it was determined that their practices contributed to predatory lending. These companies did not assertively market unemployment insurance at first. Most of them sold policies through banks and credit unions.
Updated Mortgage Unemployment Insurance
Although some companies still sell mortgage protection insurance through banks, credit unions and insurance companies, there are some who offer it through down payment assistance programs. The monies they extend to first time homebuyers for down payment is matched by sellers as a charitable donation. The costs include administrative expenses. One of the recognizable names is Bank of America. Another company with great promise is Paycheck Guardian that offers a direct to member cash benefit plan in the event of unemployment.
To replace the profits made from single premium credit life policies, Bank of America implemented the Borrower Protection Plan. The single premium credit life policies are being phased out.
Mortgage Payment Protection Inc. still sells its policies through the banks and credit unions. Utah has a program called “Neighborhood Gold”. This program offers the first year of protection free to the buyer while they pay for the second year with their mortgage payment. After the second year, the buyer communicates directly with Mortgage Payment Protection Inc. There is also a program called “Family Home Providers” of Cumming Georgia. Their administrative offices are in Roswell, GA
How Mortgage Unemployment Insurance Claims are Paid
GE Casualty offers its policy holders payments of half of all mortgage payments with a maximum payout of six to nine months at $45 per month. Most policies start within 30 to 60 days. Some companies, depending on the type of policy you have and the amount of the loan, will only pay principal and interest. Others might pay a limited amount of principal, interest, taxes and insurance. This type of payout is usually six months.
Should you purchase this type of coverage? It depends. Some people are better off just purchasing enough term life insurance to cover the mortgage amount. Some term insurance policies offer job loss protection insurance. Now that the basics of mortgage unemployment insurance are changing, they are more publicly advertised. Especially with the state of the economy, more people are in need of this type of insurance, and with need come more publicized services.