Layoff Insurance Hype

By now, you’ve probably at least heard something about the layoff or unemployment insurance hype train. Although this type of insurance has been around for years, it really hasn’t taken off until now. Of course, the reason why layoff insurance is so popular now is due to the nation-wide recession. It seems like just about everyone today is either worried about job security or making mortgage payments, sometimes even both. Layoff insurance addresses both of these issues, which is why it’s so appealing to anyone worried about their financial situation. Is it all that it’s made out to be though?

How it Works

Just like the name says, layoff insurance is a safety net in case you ever involuntarily lose your job. The exact service works differently with each provider, but the general idea is that your insurer will make your mortgage payments if you get laid off. Typically, a layoff insurance plan costs about $50 a month, depending on the benefits. Sounds great, right? As always, there’s more than a few caveats. First off, your insurer may only pay off part of your mortgage each month, depending on your policy’s monthly cap. It doesn’t last forever either, most layoff insurance policies are only good for 3-6 months, then you’re on your own again. Also, certain policies will only make the principal payments on your mortgage, meaning you still have to cover the interest.

Is it Worth it?

While there’s no question that the United States economy is in dire straits, there are some that feel many businesses are exploiting it. By praying on the fears of consumers, some companies have been able to do well in this economy. Between layoff insurance and “Bailout Sales,” the average consumer gets bombarded with recession rhetoric on a daily basis. Others simply don’t think layoff insurance is the smart choice. As most financial experts would tell you, you’re probably better off just saving up several months worth of salary. Obviously, having a large savings fund gives you much more flexibility when you’re in a tight spot. Still, layoff insurance has its benefits to those that simply cannot afford to save a larger amount of money. With so many people struggling to meet their mortgage payments while employed, this could be their best option, if not the only one. Keep in mind, if you’re worried about losing your job in the next few months, layoff insurance may be of no help to you. A typical layoff insurance policy won’t pay out any benefits for the first six months, so as to prevent people from buying up policies when they know they won’t be employed soon. Bottom line – if you can afford to save your money, then do it and prepare for the worst; if you can barely make mortgage payments as it is, you might want to at least consider taking out a layoff insurance policy.