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FOX 4 in Dallas reports of a new "Worry Free Mortgage"

On the Friday (2-6-09) evening news FOX 4 DFW did a story on what was deemed: "The Worry Free Mortgage" - a mortgage program that will pay your mortgage payments for you, if you loose your job.

Sounds great right?  It can be in the right situation but there are some things they didn't tell you...

First of all this in not a new program or part of a Government Sponsored Stimulus Package.  This type of Insurance product has been around for quite some time.  It is most notably remembered in the early 2000's when it popped up in California during the dotCOM bubble.

The program featured on FOX was a "single premium" insurance product.  Meaning there is a one time fee for the insurance and it covers a specified period of time, the one featured on FOX was for 2 years and "costs buyers about $500" and will pay "up to $1,800 per month for a maximum of six months"

What they didn't tell you is who is eligible...what the vesting or exemption periods were and how long it takes before the benefit kicks in after the initial job loss.  All of which are very important when making a decision to purchase insurance.

I don't know what the exact terms of the program covered on FOX are because they didn't list them all, but it is not uncommon for this type of insurance to have 4-6 month waiting period before you can be eligible to file a claim.  And on top of that it is just as common for there to be a 30-60 day waiting period after the job loss before the benefits start.  Some will retro-back the benefit to the actual loss date and some do not.  Also eligibility based on the type of employment and industry can be limited.

Insurance is a necessity, I agree.  However I would also urge anyone buying or refinancing to take a close look at their options.  In some cases a product like this can and will make sense.  In other's the costs simply outweigh the benefits and that cost may be better allocated for something else. 

You can watch the FOX story on their website – click here àhttp:/www.myfoxdfw.com/dpp/news/Worry-Free_Mortgage_Plan_Prot

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