Is job loss protection worth it?

All kinds of marketers are trying to allay layoff fears by offering to pick up the tab if you're pink-slipped. But the deals aren't the cure-all they appear to be.

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By Carla Fried, Money Magazine contributing writer

When a deal is a deal -- and when it isn't
The value of a purchase insurance offer depends on what's at stake.
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Ryland and Lennar
The promise: If you're let go in the first two years, you can claim up to six months of mortgage payments.
Our verdict: Too many other factors should go into a homebuying decision. This one hardly makes the cut.
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(Money Magazine) -- Call it anxiety marketing. Sellers of big-ticket items have been rolling out special deals that basically amount to layoff insurance. The gist: If you're let go soon after making a purchase, the company will either help you with the tab or let you wiggle out of the obligation.

Automakers, airlines, and even homebuilders have all been pushing the no-worries pitch. Some promotions have come and gone, but more are likely to crop up as the unemployment rate tops 10%. So should you bite?

None of the major programs Money looked at are bait-and-switch tricks. Yes, there's some fine print to watch out for. But the real catch is the way these programs can influence your buying psychology. Pay too much attention to the offers, and you could miss out on a better bargain.

What they're offering

Hyundai promises to take back a new car if you're laid off in the 12 months after buying or leasing. Meanwhile, JetBlue is promising full refunds on plane tickets or getaway packages booked by year's end. (No, you don't get to go on the trip.) And homebuilders Ryland and Lennar are offering to help buyers cover mortgage payments within 24 months of purchasing a home.

Why are they doing this? Marketing experts say the goal is to put a halo around the brand. The companies are hoping you'll be grateful to them for assuaging your anxiety -- and are meanwhile betting they'll generate enough sales to more than make up for the cost of paying out on the promises. "It's all about building relationships," says University of Virginia Darden School of Business professor Rajkumar Venkatesan.

Forget the warm and fuzzy

That's all very nice, but in this economy, you need to be a smarter consumer than ever. To that end, if you're seriously concerned about losing your job, you shouldn't even be thinking about these purchases, says Jack Gillis of the Consumer Federation of America. You should be shoring up your cash accounts, not making payments on a new car.

If your gig is relatively stable, you're already in the market for what's being marketed, and all else is equal, these deals can be a nice bonus. But rarely is all else equal. Perhaps it could be true for the JetBlue offer: There's not much difference between flying that airline vs. others, and it has been known to undercut its competition on price. A house, however, is an investment with a 30-year obligation attached. And other factors -- such as location, construction, and so on -- rank far above the promise of temporary mortgage-payment coverage.

Most important, you shouldn't let such assurance programs distract you from haggling as hard as you might. While you can't argue down the price of a plane ticket, cars and houses are, of course, all about negotiation. And you've probably never had stronger leverage than today. So try to put the deals in the back of your mind. Or use them to your advantage in negotiations with the competition: Let the Ford salesman know how much the Hyundai deal appeals to you.

Finally, the fine print

If you do find all other factors to be equal, keep these important restrictions in mind:

You'll have to fit their definition of "unemployed." In some cases you need only be eligible for unemployment benefits; others require you to show proof you're collecting them. Certain programs -- such as Lennar's -- won't kick in while you're getting severance.

Coverage isn't a family affair. The benefit is typically limited to the buyer, not the household. The unemployed person must be the primary on the car loan in order to qualify for Hyundai's takeback.

You may still owe something. Hyundai will cover only up to $7,500 in negative equity. So depending on your financing terms and the residual value of the car at the time of return, you may have to dip into your wallet to make up for what's left on the loan.

With the mortgage deals, payment is limited to the laid-off person's share of family income; so if the partner who made 25% of the money is let go, you'll only get a quarter of the maximum benefit, which ranges from $1,500 to $2,500. Such restrictions further reduce the value of a benefit you might never even have cause to claim.  To top of page

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