Getting life insurance for those with health problems

Dear Liz: I am having difficulty getting a life insurance policy for my husband. He is 39 but takes medication for his heart and kidneys. Can you suggest any companies that would be willing to extend coverage?

Answer: We'll assume that your husband actually needs life insurance -- that you or someone else depends financially on him. We'll also assume that he either doesn't have employer-provided coverage or that it's not enough. That's usually the case, since companies often provide coverage equal only to one year's salary or $50,000, whichever is less. If he needs life insurance at all, he probably needs a lot more than that.

Every insurance company is different, so your best approach might be to find an experienced insurance broker who specializes in finding coverage for people with challenging medical histories. The broker can review your husband's situation and try to match him with an appropriate insurer.

That approach is far preferable to settling for one of the alternatives to traditional term insurance coverage.

You might, for example, be tempted by so-called "guaranteed issue" coverage that's often heavily promoted in television advertisements and magazines geared to older readers. But this coverage is extremely expensive and usually provides very little coverage in the first few years, said Byron Udell, president of AccuQuote, an online insurance shopping service. If your husband should die in this initial period, all you typically would get is the return of your premiums plus interest. The face amount of coverage does increase gradually over time.

Another alternative is accidental death coverage, which typically provides up to $300,000 in benefits if your husband dies in an accident. Accidental death coverage is usually a waste of money for the healthy because the coverage is so limited, but Udell said such a policy would be better than nothing if you can't find a traditional policy.

Your husband also may be able to get credit life insurance through his credit card companies. This coverage would pay off any outstanding balances he owed.

As you can see, none of these alternatives is ideal.

"I would first exhaust every opportunity to find a traditional plan, if it can be acquired," Udell said. "Clearly, a benefit in the correct amount, as well as one that will be paid whenever you die, and from whatever cause -- short of suicide for two years -- is best." Yes, many policies cover suicide if the insurance has been in force for two years.

Short sale's effect on credit score



Dear Liz: How does a short sale affect one's credit? We are planning to sell our home, but it looks as if our sale price will be $50,000 less than what we owe.

Answer: A short sale occurs when a lender agrees to accept a home sale's proceeds and forgive the remaining debt owed on a mortgage. How such sales are reported to credit bureaus can vary, though, which has led to some confusion about their effect on credit scores, especially compared with alternatives such as foreclosure or "deed in lieu of foreclosure," in which the homeowner simply hands over the deed.

"The FICO scoring algorithm regards foreclosed and deed-in-lieu accounts as serious derogatories," said Craig Watts, spokesman for Fair Isaac Corp., which created the FICO credit score. "And a serious derogatory is the single worst thing a person can do to her FICO score."

There isn't a specific code to denote a short sale in the FICO formula, but lenders may use codes that indicate a settlement for less than what's owed. Those codes "can lead to the FICO score treating the account as a serious derogatory," Watts said.

You can try to negotiate more favorable treatment by asking the lender to report the account "paid as agreed," but your leverage in these situations isn't likely to be great. Just getting a short sale deal approved by a lender often takes weeks, and the lender isn't likely to welcome your adding extra conditions.

Liz Pulliam Weston is the author of the new book "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life." Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or via the "Contact Liz" form at www.asklizweston.com. Distributed by No More Red Inc.