Insurance – Auto, Life, Home Owner, Health

Almost every type of loan can come bundled with some sort of credit unemployment insurance. Mortgage, car loans, and even credit cards usually present an offer to buy a payment protection plan that will pay the bill if the borrower is unemployed and loses their income. However, since the plan only pays the bill, it was designed to protect the lender, and not really protect the borrower who is actually paying extra for the service! In fact, if you do take out credit insurance, it tacks an extra amount on the loan, and it actually makes the loan harder to pay off. Now who benefits from protection like this?

In my opinion, a better type of layoff payment protection was developed in the UK. This product actually insured the benefit member in case of a layoff, and paid cash to that consumer. The cash supplemented government unemployment benefits and provided enough money to keep bills and mortgages current during unemployment. So instead of having a consumer pay for a product that only paid the loan company, this product actually paid cash to the person who was paying the bill!

Why don't we have a product like this in the US? After all, over a million Americans have been laid off in the last 12 months. People over here, on this side of the "pond", are worried about their jobs too. And of course, we can hardly turn on the news without noting the alarming number of home foreclosures. And, according to government statistics, the biggest reason that people lose their homes is because they lose their incomes.

Well, the good news is that a layoff protection plan is here, in t he US, and Americans can find the same type of affordable protection that people in the UK can enjoy. It basically follows the same unemployment rules as state unemployment benefits do, but it usually pays out a lot more money. In fact, the average US state unemployment benefit is less than $400 a week. For many of us, this is not enough to keep our mortgage current, pay off loans, keep bills current, and put food on the table!

A supplemental plan can be purchased to pay out an extra $1,000, $1,500, or $2,000 a month. This cash is paid directly to the buyer of the plan, and it is not handed over to a lender. That way, the plan member can decide the best way to use the money to benefit their family during a period of unemployment. In my opinion, this type of plan is best for the consumer. The plan also contains other benefits like debt relief and legal services, and can be a valuable part of a working person's financial planning.