Are 'Layoff Protection' Plans a Good Deal?

If anxiety about layoffs is keeping you from booking a vacation to the Bahamas or buying a new family sedan, wouldn't knowing you could get a refund if you lost your job make you more willing to take the leap?

That's what companies like JetBlue and Hyundai are betting on. They're trying to woo customers by offering special breaks and refunds on big-ticket items based on whether a customer loses his job. South Korean car maker Hyundai helped spark the trend in January when it launched its Assurance program, which lets customers return any new vehicle if they lose their job and absolves them of any remaining car payments (up to $7,500). Airliner JetBlue soon followed by offering full-fare refunds to customers who get laid off prior to their trip. And men's clothier Jos. A. Bank now offers rebates to customers who get laid off after buying a suit -- and they keep the suit. (See the table below for even more offers.)

Appealing to consumers' sense of insecurity in the face of layoffs can be a productive way to drive sales at some struggling companies, says Z. John Zhang, marketing professor at University of Pennsylvania's Wharton School. "[I]t can certainly resonate with targeted customers," he says.

There are already some signs that this selling tactic works. Hyundai's sales were up 14% for the first two months of the year compared with last year, says Jim Trainor, a company spokesman. The boost can't be attributed to the Assurance program alone, but "it's been a huge help," he says. Likewise, Western National Property Management, a real estate company based in Irvine, Calif., that launched its own layoff protection program a couple of weeks ago, has seen a "significant increase in our apartment lease renewals," says company president Thomas Shelton.

While the sense of safety these programs offer is certainly enticing, make sure to consider a few factors before pulling out your wallet.

Size Up the Situation

Are you willing to buy a car or live in an apartment that you aren't particularly jazzed about just for the peace of mind layoff protection provides?

To help answer this question, ask yourself how likely it is that you will lose your job in the first place. If the odds are low, then it may not be worth it to buy your third-choice car from Hyundai instead of your first-choice car from, say Toyota. If the odds are pretty high that a pink slip will is in your future, that $7,500 in auto loan or lease forgiveness Hyundai offers sure is a lot of money not to have to pay when you're not getting paid -- and you can dodge a possible ding on your credit score.

Explore Less Expensive Options First

New promotions like these can be distracting, so be sure to use the same shopping savvy you normally would. Compare prices and see if there's a less expensive, but comparable option available. The Hyundai and JetBlue programs are attractive because they don't cost anything extra. "But if you're really concerned about money, or are truly over-extended on your budget, a better financial decision is to buy an older car," says Joe Ridout, spokesman for Consumer Action, a consumer advocacy group.

For example, a new Hyundai Elantra sedan has an MSRP of $14,815. But a used 2007 model goes for less than $10,000, according to auto research firm Kelley Blue Book. The same goes with booking a flight. When it comes to JetBlue's offer, shop around to make sure you can't get a flight for less. We found a round-trip ticket from New York to Ft. Lauderdale on JetBlue for $360, and one for $318 (flying US Airways) using travel search engine Kayak.com.

Read the Fine Print

Of course, any program offering such sizable breaks comes with plenty of fine print. To qualify for two months of free rent through property owner and developer Goldberg Companies' Layoff Proof Lease, for instance, tenants must have signed a 12-month lease and have made three rent payments. (So don't choose one of Goldberg's apartments if you've just been laid off assuming you'll get to live rent-free for a couple months.) Similarly, Hyundai buyers need to have made two payments on their car to be eligible for the refund.

To be eligible for Norwegian Cruise Line's layoff protection plan, which offers a full reimbursement to travelers who lose their jobs, cruise goers have to shell out $29.

Some Layoff Protection Programs Currently Being Offered