Pros & Cons of Job Loss Mortgage Insurance: Is Income Payment Protection for You?

One type of insurance that can protect new homeowners against not being able to make their mortgage loan payments after losing a job is unemployment mortgage protection insurance, also called job loss mortgage payment protection. For those eligible, this form of insurance will cover specified amounts toward a house payment in specific circumstances, such as when you are involuntarily laid off while in the first two years of a mortgage. Here are the pros and cons of buying mortgage protection cover, which can help a lot of people but is not for everybody.

During times of economic instability, such as an economic depression, mortgage holders may risk defaulting on a loan if they miss payments. Job loss income insurance targeted to cover mortgage payments is one way to protect your home from foreclosure.

• All or part of a mortgage payment may be covered, in some plans for as many as 12 payments for a period of months to years.
  
• As well as mortgages, some plans cover utility bills and other expenses.
  
• Some plans cover you if you lose a job due to a disability.
• Policies are eligible for annual renewal.
• Some policies require no additional payment, as they come attached to primary mortgage insurance for free, such as the HomeOpeners plan in California.

Home buyers who want to get unemployment mortgage insurance protection may find that some plans suit them more than others, that they are not eligible for the reasonably priced plans, or that they simply won't gain much by getting this insurance. The following disadvantages of job loss mortgage insurance may or may not apply to you. Investigate plans and decide whether or not insurance for mortgage unemployment will cover you sufficiently.

• Typically, these plans do not cover times when you lose your job voluntarily - for example, when you quit - or when you are fired.
  
• Payments do not go on indefinitely. For example, unemployment mortgage insurance plans may offer the protection of 6 months of payments, 9 months or 12 months.
  
• Payment protection is delayed during a vesting period typically of 1 to 6 months, in which you make payments but are not yet covered, though some insurers will refund premiums paid if you do lose your job during this period.
  
• If you suffer a job loss, the insurance may cover your entire mortgage amount, including the principle and interest, or it may cover only part of it. Depending on the plan, taxes and other costs may not be covered.
• Certain people are ineligible for certain plans. Those who are eligible are typically people who qualify for unemployment compensation and who work for an employer at least 30 hours per week and are between the ages of 18 and 60 years. You may not qualify if you work part time, are self employed, are employed by a relative, or are a temporary, contract or seasonal worker.
  
• If you are bound under union rules, loss of income due to a strike may not be covered.
  
• If you strongly suspect you will be laid off, chances are your application for job loss mortgage payment insurance will be denied, since insurers will not want to take on high risk borrowers.