At my last three closings, the buyers got job loss insurance. It’s been around for years, but I’ve never run into it. Before last week, not one buyer purchased it….ever.
It’s generally called “mortgage protection insurance” or “job loss protection” and the insurance company pays your mortgage directly to your lender in the event of job loss.
My first client signed up for it because it was free for one year through their lender, Bank of America. Thereafter, it was pretty expensive at $66 per month. Life a never-ending magazine contract, it will automatically renew unless canceled. So they opted to take it, but will cancel it before it’s not free. The second client was buying new construction and the builder included the policy free for two years. The third client bought mortgage protection insurance on his own from this place.
A typical policy will have a 30 day waiting period after a job loss and then will pay your entire monthly mortgage payment (including escrows) for 6 months directly to your lender.
If the policy is free, it makes sense to accept the policy and then cancel it before premiums become too expensive. In the end, it’s probably just another marketing tool, but if it makes a buyer feel more comfortable with their purchase then what’s the harm.