Do You Need a Job Loss Rider?

Posted October 21st, 2010
by Staff (no comments)

In this economy, can anyone trust that their job is safe? Job loss can be financially devastating, but it’s nothing compared to the risk of losing your home when you can no longer afford to keep up with the mortgage payments. Added on to your existing policy as a rider, protection against job loss can pay your mortgage when you lose your job through no fault of your own.

  • Job loss results in foreclosure. According to a study conducted by the Pennsylvania Association of Realtors, job loss and unexpected medical bills are the main causes of foreclosure in that state. Contrary to the popular view that subprime housing is the main cause of foreclosures, 57% of households said one or more of their wage earning family members had experienced job loss in the 12 months leading up to the foreclosure, and 47% said they had been blindsided by unexpected medical bills.
  • It’s not about subprime mortgages. In New York, a Poughkeepsie-based nonprofit housing agency determined that 66% of homeowners who were seeking foreclosure prevention counseling said it was loss of jobs or a reduction in income that started their financial nosedive. Most of them had conventional fixed-rate mortgages, not those subprime loans with creative financing we’ve heard so much about. 79% of those seeking counseling have conventional loans, compared with 43% in late 2008 when the program began.
  • It’s hitting middle America. Although the subprime mortgage market may have started the ball rolling and exposed the housing bubble and Wall Street betting – ah, trading – practices, the folks who are now most at risk don’t even have subprime credit ratings. As the financial slump wears on, more and more companies are looking for ways to cut expenses. With this kind of environment, it’s hard to tell whose job is safe anymore.
  • Job loss rider. A job loss rider is a special add-on to your existing homeowners insurance policy that pays your mortgage and protects your home in the event you are let go through no fault of your own.
  • Insuring the loan. The rider is designed to pay the lender, not the homeowner, in the event of job loss, so don’t expect to get any checks in the mail.
  • Waiting period may apply. There is usually a 30 – 60 waiting period after job loss before coverage kicks in, so be sure to review your policy carefully and keep enough in savings to cover the first few months of expenses after an involuntary job loss.

No one expects to lose their job, but these days, it’s wise to think ahead. If your mortgage payment is heavily dependent on your income from working, now is a good time to consider adding a job loss rider. If you do find yourself out of work, you’ll have peace of mind knowing you can look for a replacement job without risking the loss of your family home.

Categories: Advice, Insurance Tips

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