How can you increase your sales, create more business for your customers, and put consumers at ease in a down economy? The answer could be Involuntary Unemployment Insurance. This blanket coverage is designed to cover mortgage payments when someone loses their job. This coverage is a win-win for everyone!

With unemployment rates rising in many states, mortgage lenders, builders, real estate brokers, and other professionals providing services to the home market are becoming more and more concerned about decreases in sales and home buyers continue to stay out of the market. They are also concerned that if more people become unemployed, they won’t be able to make their monthly mortgage payments.

To prevent this from happening and to keep their revenue flowing, many lenders, brokers and builders, are including involuntary unemployment coverage for their customer at no cost. To the purchaser, this coverage is can be used as a marketing tool to help the seller differentiate themselves from the competition as well as offer a hedge for unemployment. The existence of the coverage may be just the security the customer needs to finally make the purchase.

If the consumer makes the purchase and loses their job, after the waiting period and vesting period, the insurer makes the monthly payment for them for up to six months. As a result, the entity providing the coverage is prevented from losing revenue and their customer is prevented from losing their home.

Why Blanket?

This coverage is called blanket involuntary unemployment insurance. It gets this name because the coverage is provided (“blanketed”) on every home sold or every loan closed. From an insurance company’s standpoint, this approach reduces the adverse selection factor of the coverage only being purchased by individuals who know they are becoming involuntarily unemployed (laid off).

This insurance can provide coverage for up to five years and usually makes a maximum of six monthly mortgage payments. The coverage also requires a sixty day vesting period and a thirty day waiting period. Policy pricing is determined by length of coverage, number of monthly payments, and the dollar amount of each payment.

The minimum premium for this coverage is $100,000 and there is a 200 monthly home minimum to be considered. Also note that the coverage carries a 100% minimum earned premium.

Blanket Involuntary Unemployment Insurance is both an excellent marketing tool and an efficient loss mitigation tool that becomes very much in demand when the economy slows and unemployment rates are on the rise.

Frequently asked questions:

• Q. What if a married couple both receive income and one of them becomes unemployed; are they still covered?
• A. If a husband or wife becomes unemployed, the benefit will be pro-rated based on their total income. For instance, if a couple’s annual income is $100,000 in total, $50,000 each, and one person became unemployed, the policy would pay 50% of the benefit.
• Q. What if there is only one month left in the term of the policy and someone loses their job; how much are they eligible for?
• A. As long as they become unemployed any time during the coverage period, they can receive the maximum number of payments under the policy. For instance, if there was only one month left in the coverage period and an employee could receive three monthly payments on their auto lease, then they would receive all three payments if they were eligible after their waiting period.
• Q. How does reporting work to the company?
• A. A monthly report on a simple Excel Spreadsheet to the Insurance Company is all that is required.
• Q. Who receives the payments in the event of a claim?
• A. Payments are made out to the bank, landlord, or other financing company. Payments are never made out directly to the individual.
• Q. What is the minimum premium?
• A. Minimum premium is $100,000.
• Q. How much does this cost?
• A. Premiums depend on the coverage period, payment amount, number of payments and to some extent the local unemployment rates.
• Q. Are there any exclusions for HUD Housing?
• A. No, there are not.
• Q. What is the difference between the vesting period and the waiting period?
• A. The vesting period is the amount of time you would have to wait before you would be eligible for the benefit and the waiting period is the amount of time after the individual becomes unemployed before payments can start. For instance, if there is a 60 day vesting period and the policy inception date is 1/1/2008, then the individual would begin to have coverage on 3/1/2008. If the person became unemployed after 3/15/2008 and there is a 30 day waiting period then payments would begin on 4/15/2008 in the event they were still unemployed at that date.
• Q. How long does it take to receive a proposal?
• A. Two weeks.
• Q. Is the carrier a rated?
• A. Yes, the carrier is rated A-
• Q. Can the waiting period and vesting period be amended to suit my needs?
• A. Yes they can.
• Q. Does each person I wish to cover receive a policy or dec page?
• A. They receive an Evidence of Coverage Certificate.
• Q. How is a claim situation handled? How quickly are payments made after the vesting period/waiting period?
• A. The Insurer’s number is on the Evidence of Coverage that the consumer receives. The consumer calls the Company directly to handle the claim. Once the Company receives all of the documentation from the consumer, they issue a check within a week.