Late in 2008, the US economy began taking a downturn. Investors started losing money, would-be retirees began losing their nest eggs, and millions of workers became unemployed. It didn't take long for some companies to devise plans to entice consumers to spend money they may not otherwise spend out of fear of losing their jobs. These "job-loss protection plans" often contain some fine print that may sour the deal for you.
How They Work
Job loss protection plans sound simple, especially when you hear them explained in a 20 second TV commercial. The general idea is this: If you buy a company's product and you later lose your job, the company will generally do one of three things, depending on the plan:
- Take the product back
- Lower or eliminate your monthly payment
- Refund your money
The details of each plan are different, but they all have the same goal. Namely, it's to make you feel better about spending your money by giving you the peace of mind knowing that you can back out of the deal if you lose your job and can't pay anymore.
Popular Plans and Fine Print
Today, there are hundreds of these job-loss plans, covering practically everything from your monthly cell phone bill to your mortgage payment. Here are some of the plans you hear about the most, along with some of the fine print to be aware of:
Hyundai. This car maker was one of the first to come out with a job-loss plan. Under the Hyundai Assurance program, if you lose your job within 12 months after buying or leasing a new Hyundai, you may return the vehicle and the company will pay up to $7,500 of "negative equity" on the vehicle.
For example, say you buy a new Hyundai for $19,000 and lose your job five months later. When you return the car, you still owe $17,000 and the car's worth $15,000. You don't have to pay the $2,000 negative equity.
Drawbacks. There are a few things in the fine print that may not make this such a great deal. For example, the plan comes into effect only after you've made two full payments on the car, and the company won't refund that money to you. Also, you have to be absolutely, 100% unemployed when you return the car. If you take on temporary or part-time work after losing your regular job, you don't qualify for the plan.
JetBlue. The airline also was quick to come up with a plan called the JetBlue Promise. The airline promises to refund the airfare you paid or the vacation package bought if you lose your job after making the purchase.
Drawbacks. There are several things to be careful of here. For instance, you had pay for the tickets. So, if your wife bought the tickets on her credit card and you lose your job, you don't get a refund. Also, you need to act quickly. To get a refund, you need to fax a special form to the airline within 14 days of the scheduled departure date. It has to be faxed even earlier if your planned travel is during the Thanksgiving or Christmas holidays.
Citigroup. The lending giant came up with the Homeowner Unemployment Assist Program. If you lose your job the company will reduce your mortgage payments to an average of $500 a month for three months. If you can't find permanent work by the end of that time, the company will work with you to work out a solution.
Drawbacks. You need to be at least 60 days behind or "delinquent" on your mortgage or it must be in foreclosure before you're eligible for the plan. If you're married, you may not qualify for the program if your spouse's name is on the mortgage and she's currently employed. If your escrow payments are more than $500, you must pay the difference. And the program applies only to first mortgages held by Citigroup. It doesn't apply to second mortgages or home equity loans.
What's "unemployed" and "job loss?" In practically every job loss protection plan, you're not eligible unless you lost your job involuntarily, meaning you were laid off, or your employer shut down. If you retire, resign or were fired because you committed a crime or for disciplinary reasons, you don't qualify.
The Devil's in the Details
Before you rely on one these "job loss" guarantees when deciding to buy something, read the plan carefully. You may be surprised to learn that the simple, "sweet" deal you heard about on the radio or TV isn't so simple. And it may not be too sweet, either, especially if you fall into one of those areas where you don't qualify for the plan's benefits.
Questions for Your Attorney
- If I buy my brother's car that's covered by a job loss plan, am I covered by that plan, too?
- Do I have to worry about anything if the company that gave me a job loss protection plan declares bankruptcy?
- Are there any state or federal income taxes to worry about if I cash in on a job loss plan?