Why Group Life Insurance Matters

…A case study

While the sun shines

For the sake of this outline, the employer will be called Company, the employee will be called Arthur, his spouse, Angela, and his daughter, Anne.

Arthur is a professional in his field and accepted a position at Company in the fall. With this strategic job move, his wife, Angela could choose to stay at home with their young daughter. This would save on both childcare and transportation as they could limit themselves to one vehicle and Arthur could take the train to work.

Company offered a competitive benefit plan, including life insurance, short and long term disability, health, dental, pharmacy, and vision, as well as a Group RRSP. He and Angela made a personal plan to set aside so much of his income monthly to save for a house.

Having passed the three-month probationary period, Arthur became eligible for the benefit plan, including the Group RRSP which was a matching 6%. However, as he and Angela were focused on their own savings just now, Arthur declined participation. Maybe next year would be a better time to join. There was no rush.

Arthur was offered the medical questionnaire to apply for more life and disability coverage, but at $5,000 a month, he felt that would be plenty. He wasn’t that old and maybe when he applied for the Group RRSP, he’d think about completing the medical. Yes, he was aware that this would also limit his Life Insurance. Although the coverage was for 200% of salary to a million dollars, without evidence approval, he would limit his coverage to $200,000. This was fine, he told the plan administrator, he did have a $100,000 term life policy and surely that would be plenty.

All good things

A couple of months into the new position, Arthur was fitting in well with the team and could see a real future. He and Angela had saved just over $10,000 and if all continued, he felt sure they could apply for a mortgage in another year.

Life happens … and so does Death.

On a cold February day, Arthur slipped, fell, and incurred a major head injury, which resulted in a massive stoke and subsequent coma.

Within a year, almost to the day, Arthur died.

Group Life Insurance Coverage:

• Life Insurance $200,000 @ 200% of salary
• STD $1,500/week
• LTD $5,000/month
• Pharmacy
• Extended Health
• Vision
• Dental Care

 During the year, Arthur was paid on a non-taxable basis:

• 17-weeks of Short Term Disability amounting to $25,500
• Eight months of Long-Term Disability totally just over $40,000
• Upon his death, Angela received $200,000 of Life Insurance

 After his death, Angela and Anne became entitled to fully paid Survivor Benefits 24 months health and dental which outside of their claims, would amount to more than $14,377 of premium.

 Total last benefit from the benefit plan $279,377, not including health, pharmacy, vision, or dental care claims.

Is that enough?

At the end of the day, that will be up to Angela to decide.

Estate:

• No will
• No home ownership (renting). This is real life after all.
• One vehicle. 
• Bank accounts/Savings $13,500.
• Investments, none.
• Personal Life Insurance, term policy $100,000.

Debt: 

• Loans/Credit Cards $54,050
• Annual rent on residence $64,641
• Minimum annual standard of living, (not including food and/or travel and child care) $31,000.

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Note: this was written without the aid of Artificial Intelligence (AI)