Job loss insurance gaining popularity in Florida

When you think about insurance for your home, you usually think about your property insurance and maybe mortgage insurance. (Mortgage insurance protects the lender if you die or become disabled.) In Florida, you’ll probably think about flood insurance, too. But would it ever occur to you to buy job loss, or “unintended unemployment,” insurance?

Florida’s unemployment rate has been consistently higher than the U.S. average since early 2009. In February of this year, Florida came in at 11.5 percent, compared with the national 8.9 percent. Add to that the state’s foreclosure rate — 1 in every 449 housing units in March — and you’d guess that not many Floridians are willing to risk buying a home. But you’d be wrong.

Anecdotal evidence says that home buyers, especially first-time buyers, are slowly wading into homeownership. And there’s a fairly good chance that lenders, builders or state housing agencies will bring up the subject of job loss insurance when they’re going through the numbers with these buyers. We want buyers to be aware of the pros and cons of this coverage.

The first thing to know is that the insurance will probably be offered “at no additional cost” to the buyer. Unlike mortgage insurance or homeowner insurance, job loss coverage comes with no out-of-pocket obligation.

As usual, “free” isn’t always free. Someone has to pay premiums, and it’s generally the lender or builder. That company gets a wholesale rate on the coverage and, not surprisingly, rolls it into the purchase price or other fees associated with the deal. The wholesale rate can be as low as $200 per month per policy, but it can also be much higher. As with all things wholesale, the price depends on the volume of policies, coverage limits and so forth.

We’ll continue the discussion of coverage and other pros and cons in our next post.

Source: Miami Herald, “Protection plan for borrowers,” Kenneth Harney, 03/27/11

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