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Unemployment mortgage protection insurance

In the event of a job loss, you are eligible to receive unemployment insurance from the State unemployment agency, but those benefits are not enough to cover even the living expenses for most people. If you own a house, you want to protect your house so that you don’t need to worry about finding roof to live under and instead you can look for a new job and think about how to pay bills. Unemployment mortgage protection insurance essentially covers your mortgage payments while you are unemployed. The coverage is not on permanent basis. As soon as you find a job or if you exceed the maximum allowed period, insurance will stop paying. MLINS09©

Depending on the extent of coverage you choose, job-loss mortgage protection policies cover all or part of your monthly mortgage payments. Many policies will cover 6-8 months of mortgage payments in a year. Most policies do not pay until 30 days after you are laid off and may require you to show proof of unemployment.

Most insurance companies do not pay if the mortgage owner loses jobs within 6 months of buying a mortgage protection policy. This clause is added because insurance companies do not want borrowers to sign up for a new policy if they anticipate a lay off in the company (without this protection, insurance providers may incur big losses and may have to file for bankruptcy in an economic downturn. In 2008-09 several companies declared bankruptcy or received government bailout funds in order to survive)

La rêveuse
Creative Commons License photo credit: Arslan

Policy premium and payout varies based on the insurance provider and your coverage needs. A typical policy that insures $1,000 monthly mortgage payment and covers up to 6 months of payment will cost you about $50. If your payment is $2,000 per month, you will pay a premium of $100 per month. Please note that only mortgage payment is covered by most policies. You will have to pay other expenses such as taxes, utility bills etc.

If the homeowner has emergency funds set aside to cover living expenses and mortgage payments for up to 6 months, then it may not be such a good idea to buy unemployment mortgage protection. However, if the likelihood of losing a job is high OR if you do not want to dip into your savings in such unfortunate events, you can buy this insurance.

In United States, this insurance should not be confused with the unemployment insurance offered by Department of Labor which pays a fraction of living expenses based on credits computed using your employment history. State unemployment agencies do not consider the fact that you have a mortgage or other obligations. The benefits earned are generally not enough to cover mortgage payments.

Difference between Mortgage Unemployment Insurance and Mortgage Disability Insurance

Unemployment insurance pays benefits when you lose your job involuntarily and covers a short period. Insurer generally pays for a maximum of 6 months or until you find a new job, whichever occurs first. Since most people will find a new job within 6 months, you are not likely to make full use of the benefits for the maximum allowed period.

Mortgage disability insurance will make mortgage payments on your behalf, if you become disabled due to an injury or sever health condition. This kind of insurance will generally make mortgage payments for a longer duration than the unemployment insurance. Benefits are paid for up to 2 to 5 years.

  1. Saundra Council
    December 12th, 2009 at 02:31 | #1

    How sonn does the disability insurance kicks in, all how much is it.

  2. prion
    December 13th, 2009 at 14:52 | #2

    Saundra – it depends on the insurance policy, but generally right after you prove your disability conditions. Insurance premium also varies depending on the company you choose.

  3. December 23rd, 2009 at 15:25 | #3

    I am currently trying to find a private unemployment insurance policy to cover my mortgage if i get laid off… however i can’t find anything in the US that offers it.. please help!

  4. prion
    December 24th, 2009 at 02:58 | #4

    Christina – You can get insurance quotes from any any insurance broker. In case if you cannot find any, search online for insurance brokers or search for “mortgage protection insurance” You should see some ads and real offers. Please post here if you still don’t find anything.

  5. rob
    January 5th, 2010 at 22:51 | #5

    I recently purchased a home and I am very interested in mortgage protection/involuntary unemployment insurance. I have not been able to find a company that offers such coverage. Any guidance or recommendations are appreciated.

  6. prion
    January 7th, 2010 at 03:47 | #6

    Rob – Use insurance advertisement text inks at the top of this page. Those are from third party advertisers, but should give you options to purchase mortgage protection insurance.

  7. Susan Landran
    October 14th, 2011 at 23:58 | #7

    I called endless number of companies and these insurance policies are NON-existent in the US, only in the UK or Australia. Please post company names to prove me wrong … Because this does not exist.

  8. David
    January 19th, 2012 at 21:43 | #8

    I can’t find anything when I google, and all the links at the top are for life insurance or other types of insurance.

  9. prion
    May 22nd, 2012 at 13:23 | #9

    All those who are looking for company names or quotes on mortgage protection insurances, check out this article below. It shows how you can build life insurance as an alternative to mortgage life insurance

    http://www.mortgagelifeinsurances.net/term-life-insurance-as-an-alternative-to-mortgage-life-insurance

  1. July 3rd, 2009 at 16:11 | #1