CarInsurance.com Insights
- Most job loss insurance policies cost about $10-$30 per month and are added to your loan payment.
- Job loss insurance doesn’t protect your car; it protects your ability to make payments.
- If your income is unstable or you’re financing a new car with a long-term loan, adding this coverage can help you avoid repossession and credit damage during periods of unemployment.
Losing your job can make it difficult to keep up with car payments, especially if you’re financing or leasing a vehicle. Job loss insurance, also called payment protection insurance, can help cover your loan or lease payments while you’re between jobs or recovering from an illness.
This optional add-on or separate policy is designed to prevent missed payments, protect your credit and satisfy lien holder requirements when you lose your job. While it’s not the same as car insurance, it can offer peace of mind if you rely on your vehicle for work or are concerned about keeping up with payments during unemployment.
What is job loss insurance for car loans?
Job loss insurance — sometimes called payment protection insurance (PPI) — is an optional add-on offered by lenders, automakers, or insurance companies. It covers your car loan or lease payments for a limited time if you lose your job through no fault of your own, such as layoffs or company downsizing.
Unlike regular car insurance, this protection focuses on your financing agreement, not vehicle damage.
How does job loss insurance work?
If you become unemployed, job loss insurance can help make your monthly car payments directly to your lien holder or finance company for a set period — usually between three and six months.
Some policies may also cover payments if you can’t work due to an accident or medical condition. You’ll typically need to show proof that your job loss was involuntary and that you’re actively looking for work.
| Coverage Type | What It Covers | When It Applies | Who Receives Payment | Policy Type | Typical Cost |
|---|---|---|---|---|---|
| Job Loss Insurance (Payment Protection Insurance) | Covers car loan or lease payments if you lose your job due to layoffs or disability. | When you lose your job involuntarily or can’t work due to illness. | Lien holder or financing company. | Add-on through lender or separate policy. | $10–$30/month added to your loan payment. |
| Gap Insurance | Pays the difference between your car’s value and the amount owed on your loan or lease after a total loss. | When your car is totaled or stolen. | Lien holder or your lender. | Add-on or standalone coverage. | $5–$15/month. |
| Comprehensive/Collision Coverage | Repairs or replaces your vehicle after an accident, theft, or weather damage. | When your car is damaged or destroyed. | You or your repair shop. | Standard auto insurance policy. | Varies by vehicle and deductible. |
| Disability Insurance | Replaces part of your income if you can’t work due to injury or illness. | When you’re temporarily or permanently disabled. | You (policyholder). | Separate health or life insurance policy. | 1%–3% of annual income. |
| Credit Life Insurance | Pays off your remaining car loan balance if you pass away. | In the event of the borrower’s death. | Lien holder or lender. | Add-on through lender or separate life policy. | $50–$100/year depending on loan size. |
What’s included (and excluded) in job loss coverage
Typically covered:
- Layoffs, company closures or downsizing
- Short-term disability or illness
- Temporary leave due to injury
Usually not covered:
- Voluntary resignation or retirement
- Self-employment or freelance work
- Termination for cause or poor performance
Speak with a friendly agent and get your quote in minutes!
Where to get job loss protection insurance
Job loss insurance can come from several sources:
- Dealerships or automakers: Brands like Hyundai, Kia and Ford Credit offer payment protection as part of new car financing.
- Banks and credit unions: Some include it as an optional add-on during your loan or lease application.
- Insurance companies: Standalone policies may bundle job loss coverage with life or disability insurance.
Always read the fine print: Coverage limits and waiting periods vary significantly.
Should you buy job loss insurance?
Job loss insurance can give you peace of mind if:
- You’re the main household earner.
- You have a large car loan or lease balance.
- You don’t have much in savings to handle missed payments.
However, it’s not ideal for everyone. Those with stable employment, low loan balances, or substantial emergency savings may be better off skipping this add-on.
Alternatives to job loss insurance
If you lose your job, you can also:
- Contact your lender early to request a payment plan or deferral.
- Refinance your car loan to reduce monthly payments.
- Check for hardship programs offered by automakers or banks.
- Use an emergency fund to cover a few months of payments while looking for work.
Frequently Asked Questions: Job loss car insurance
Does job loss insurance cover self-employed drivers?
Most job loss insurance policies do not cover self-employed or freelance workers since they can’t be officially laid off. However, some insurers offer modified coverage through disability or income protection plans that may apply if you can’t work due to illness or injury.
Can I add job loss insurance after signing my car loan or lease?
In most cases, yes. You can request job loss coverage from your lender or insurer at any time, but adding it after signing your financing agreement may require underwriting approval or an updated payment plan.
Can I add job loss insurance after signing my car loan or lease?
In most cases, yes. You can request job loss coverage from your lender or insurer at any time, but adding it after signing your financing agreement may require underwriting approval or an updated payment plan.
Does job loss insurance replace my income?
No. Job loss insurance only covers your car loan or lease payments. It doesn’t provide income replacement for other expenses like rent or utilities.
Is job loss insurance worth it?
It can be. Job loss insurance may be worth considering if you have little savings, a long-term loan or an unstable job market. If you have an emergency fund or short-term disability coverage, you might not need this extra protection.
Will my lien holder require job loss insurance?
Usually not. Most lien holders do not require this coverage, but they encourage it for borrowers with high loan amounts or limited credit history to ensure payments continue in case of a lost job.
Final thoughts
Job loss insurance won’t replace your income, but it can prevent loan default while you’re between jobs. For borrowers with limited savings or tight budgets, it can act as a financial safety net until you get back on your feet.
Still have a question? Ask our experts
Get advice from an experienced insurance professional. Our experts will help you navigate your insurance questions with clarity and confidence.
Browse all FAQs
