DEAR DAVE: My husband was recently denied term life insurance because he has a criminal record from a long time ago. The good news is that, in a year, he'll be far enough removed from the incident that he'll be eligible for a policy. He has a whole life policy for $75,000 from before, which he doesn't plan to cancel. We have two small children, so is there another kind of policy he could get in the interim?
DEAR DANA: If you can't get term life insurance, you can't get whole life. It's the same underwriting process. I only recommend term policies, but under these circumstances I'd keep the whole life in place because he's basically uninsurable.
There are a couple of things you can do in this kind of situation. One thing is to get a mortgage life insurance policy. These are usually available without any kind of major inspection, and they pay off your mortgage, in full, in the event of death. It's about 10 times more expensive than regular term insurance, but at least it will pay off the house.
Another thing to look into is an automatic issue-type policy. Lots of banks offer these when you open an account. Usually, they'll send you an offer for a $10,000 life insurance policy. But if you pick up four or five of these, then he's got another $50,000 on top of the $75,000 already in place. It's still not enough, but it's better than nothing.
But I wouldn't spend a lot when he's only got a year left until he can get some good, proper coverage. I recommend people have eight to 10 times their annual income in life insurance coverage. So, if he makes $50,000 a year, he needs to have $400,000 to $500,000 in a good, level term policy. That's what you guys need to shoot for a year from now.
Finding good tenants
DEAR DAVE: I have a townhouse I'm preparing to rent. Do you have any advice for evaluating potential tenants?
DEAR CHRIS: The first thing I'd do is pull a credit bureau report. I'm not really worried about their credit score; I just want to see if they have a history of late or missed payments. Talk to some local property management firms and see who they use to pull these reports.
I'd also recommend doing a background check on the potential renters. Talk to the owner of the last place they rented as well as the one before. I advise this because there are some dishonest landlords out there who will tell you that a bad tenant is wonderful just to get them out of their property.
A lot of things, though, are simply common sense measures. Have them fill out an application, which includes their income and a list of their debts. If they make $2,000 a month and have $2,500 a month in debt payments, you don't want them as tenants. In this scenario, a smile and “I promise I can pay it” won't work.
Spend some time just talking with them too. Really listen to what they say and how they say it. Get a feel for what kind of people they are, and, if they have children, pay special attention to the kids. Are they well behaved, or do they run around and act like a bunch of wild animals? If it's the latter, then they're going to tear up your house.
And guess what? If the parents can't discipline their kids, there's a good chance they can't discipline themselves either. You don't want to get mixed up with that. People who let kids run the household don't make good tenants.
Finally, remember to trust your gut instincts. If you get a weird vibe from someone, or if things just feel strange, don't rent to them. Chances are, there's a reason you have those feelings.
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