HomeUnemployment Protection Insurance
New Program Eliminates
Many Home Buyers' Greatest Fear
T he greatest fear of most home buyers is not being able to pay theirmonthly mortgage payment for up to 30 years straight. Ask yourself: if youlose your job tomorrow, how many months could you pay your mortgage beforeyour savings run out? Thanks to this new mortgage industry program, thefear of unemployment causing a mortgage foreclosure has been lessened.
Milwaukee, Wisconsin and Stamford, Connecticut - MGIC Investment Corporationand Warrantech Corporation recently announced that lenders soon will beable to offer borrowers a Warrantech home service contract that includesunemployment protection.
The unemployment benefit works this way: Under the plan, the home owneris offered a maximum benefit of $1,000 a month for up to six months of involuntaryunemployment within a twelve month period. Of course, if a borrower's housingpayment is higher than $1,000 per month, the borrower will have to makeup the difference. Presumably, an unemployed borrower would also be eligiblefor some type of unemployment compensation. This program is not a creditlife insurance program to cover disability or death of one or more borrowers.Nevertheless, an unemployment protection policy may give many would-be borrowersthe confidence to become home owners.
Unemployment protection is offered as an additional feature to Warrantech'shome service contract and is not available separately. The annual cost fora policy ranges from $180 to $408 depending on the type of policy purchased.The home service contract has been offered by several companies for manyyears-Warrantech is the only firm currently offering unemployment protection.
"The addition of unemployment protection to our home service contractgives borrowers a low-cost safety net that will pay their mortgage shouldthey involuntarily lose their job," said Warrantech Home Service PresidentJoseph Melendez. "This type of coverage, combined with Warrantech'shome service contract, will help home owners overcome those critical financialstresses, such as expensive household repairs and job loss, that often canlead to foreclosure."
A unique feature of both the home service contract and the unemploymentprotection plan is the availability through mortgage lenders and the extensionof the coverage beyond five years. Until recently, similar types of coveragewere obtained through Realtors and home builders and came with limits ofone to five years.
In order to obtain the coverage, borrowers must purchase the policy inconjunction with a home service contract. Warrantech's home service contractsare issued and serviced by Warrantech Home Service Company, marketed nationallyby MGIC Investor Services Corporation, a subsidiary of MGIC Investment;and are insured by American Zurich Insurance Company, rated A+ Superiorby AM Best Company. The contracts are available to home owners through mortgagelenders who have signed up to offer the program and provide for the repairor replacement of mechanical systems and appliances that fail due to agingand normal usage. Unemployment protection is offered subject to individualstate approval.
Is unemployment protection a good deal? Combined with the home servicecontract, the unemployment benefit costs extremely little when comparedwith the protection it brings. Even at $408 per year, a borrower who isunemployed once for three months will get back over seven years of premiums.Unless a borrower has the equivalent of at least six months of salary availablein liquid assets, unemployment protection provides substantial financialprotection and peace of mind.
Unemployment protection coupled with a home service contract is a newproduct being rolled out across the country. Home buyers interested in obtainingthis type of coverage should ask their loan originator if they offer thisproduct. Home owners should contact their mortgage servicer to check availability.