Mortgage Protection Insurance for Unemployment
A tough economy prevents many people from buying a home. The ongoing threat of losing one's job makes such a large commitment terrifying. Mortgage unemployment insurance can provide current and potential homeowners with the peace of mind they need to fulfill their dream.
What is Mortgage Unemployment Insurance?
Mortgage unemployment insurance provides monthly mortgage payment protection should you lose your job under specified circumstances. It pays some or all of your mortgage loan payment to your lender while you are unable to.
It is a coverage you can add to your mortgage protection insurance (MPI). Mortgage unemployment insurance is also sometimes called mortgage protection insurance for unemployment, out of work insurance, involuntary unemployment insurance, job loss protection insurance, or job loss mortgage insurance. It is a safety net for many homeowners, but not everyone qualifies.
Qualifications Required for Mortgage Protection Insurance for Unemployment
Most insurance companies have strict requirements when applying for mortgage unemployment insurance. While some may vary, the general qualifications are as follows:
- Must be currently employed full time, working at least 30 hours per week for the previous 12 consecutive weeks.
- Must not be currently retired.
- Be between 18 and 60 years old.
- Must be a W-2 wage earner -- not self-employed, a seasonal worker, an independent contractor, or working for a family member.
- Must not be active military personnel.
- Must not have stopped working due to pregnancy, medical reasons, or family-related reasons. (Some policies do cover disability).
- Job loss must be due to involuntary unemployment.
- Eligible for state or local unemployment benefits.
- Must not have known that unemployment was coming.
Can Freelancers Get Job Loss Mortgage Insurance?
No. Job loss mortgage insurance typically only covers homeowners with a stable job and steady income. The fluctuating nature of freelance work disqualifies freelancers from such protection.
Do You Need to Be Working for the Same Company for a Certain Amount of Time?
Yes, 12 weeks. Typically, insurers are more concerned with consistent income than the length of time you have been with the same company, so the time limit is less than getting approved for a mortgage. For instance, many require that you have 12 consecutive weeks of full-time income before applying for job loss protection but don't necessarily specify that it comes from the same company. Ask your insurance agent for specifics.
It is worth repeating that insurers want to see a stable job. The longer you are with the same company, the better your chances of getting approved with lower insurance rates.
Can Union Workers Get Unemployment Protection for Strikes?
The answer depends on your specific policy. Some insurance companies do provide coverage during strikes while others do not. Check your policy's fine print for specifics.
What Qualifies as Involuntary Unemployment?
Though you should always check your insurer's exact definition, the following are the most common criteria.
- You must not have voluntarily resigned.
- The job loss cannot be due to criminal or employee misconduct or dereliction of duty.
- You must not be receiving termination or severance pay from your company.
- It must not be due to a regular seasonal shutdown or an expired contract.
One example in which mortgage unemployment insurance applies is the COVID-19 pandemic. It has severely impacted homeowners' ability to pay their mortgage. However, job loss due to such an epidemic qualifies as involuntary unemployment. Unless the policy states otherwise, homeowners with mortgage unemployment insurance should be covered.
Many policies do not cover death or disability as involuntary unemployment, while other policies include disability and life insurance coverage. Your standard MPI most likely covers death and disability. Check your policy for specifics.
How Does Job Loss Mortgage Insurance Work If I Lose My Job?
If you experience a job loss that meets your policy's criteria for coverage, you file a claim with your insurance provider. An adjuster examines your case to either approve or deny the request. If approved, your monthly mortgage payment gets sent directly to your mortgage lender.
Renewing Your Mortgage Protection Insurance for Unemployment Policy
When it's time to renew your mortgage payment protection policy, be prepared for some changes -- and not good ones. Many homeowners expect their premiums to decrease as their mortgage balance decreases, but this is usually not the case.
Age plays a large role in your premiums, so you will likely find your rates higher than they were, regardless of your loan balance. Additionally, if you are over or close to the age limit -- usually 60 years old -- you might get denied coverage altogether.
Filing a Mortgage Unemployment Insurance Claim
If it's time to file a claim, you can do so by calling your insurance provider or visiting their website. Most insurers require that you submit a claim by a specific time -- usually within 30 to 120 days of the job loss. The items you need for the claim depend on your insurer's requirements, but you can expect them to ask for:
- Proof of the employment you lost -- usually in the form of pay statements for a specific amount of time.
- Documentation of the job loss, including the reason behind it.
- Some may require proof that you registered qualified for unemployment benefits by your local unemployment office or career center.
Be sure to ask your insurer for any additional documentation they might need.
Mortgage Unemployment Insurance FAQs
The following are some common questions regarding mortgage protection insurance.
Are There Mortgage Protection Insurance for Unemployment Policy Limits?
There are three typical policy limits with unemployment mortgage insurance.
- Job loss mortgage insurance often only covers your mortgage for a specified time limit, usually anywhere between 6 and 12 months.
- Some policies cover the full monthly payment of home loans, while others only pay a percentage.
- Most policies only pay your mortgage payment, not any fees or additional expenses.
Are There Limits to the Number of Mortgage Unemployment Insurance Claims You Can Make?
Typically, no. Most insurers only place a cap on the number of months and the maximum amount they pay on your mortgage. If you make several claims, you will likely get approved as long as you have not yet reached those caps and the job loss or accident meets the insurer's criteria.
Does Job Loss Mortgage Insurance Work During a Recession?
Yes, unless your policy states otherwise, your mortgage protection unemployment insurance should cover you during a recession, as well. For some people, its policies and financial tools such as these that help them successfully get through these tough economic times.
How Long Before Benefits Pay Out?
Most policies have a waiting period that ranges from 30 days to 60 days. If job loss occurs during this time, you will not receive benefits.
Additionally, some insurers do not provide payouts until a particular time after the job loss occurs. This period is usually about 14 to 30 days.
How Does Unemployment Mortgage Insurance Work With Spouses?
If both spouses are on the mortgage, either party can purchase job loss insurance coverage. However, if only one party's name is on the mortgage, they are typically the only ones who can buy the policy.
Mortgage Unemployment Insurance Companies
Many homeowners find that their home insurance company offers job loss insurance as a rider on their standard home policy. Some mortgage lenders and insurers also offer this protection as a stand-alone policy.
Job Loss Mortgage Insurance Cost
The cost of adding job loss mortgage protection to a standard mortgage protection policy varies. Standard MPI policies can start as low as $50 a month on a $150,000 loan. Adding additional coverage, endorsements, and a larger mortgage can take that price to more than $150 per month or higher.
I hope that helps!
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