Life, Health, and Disability Insurance Jamie Lee and Ross both have employer-sponsored group health and dental plans that offer both a small amount of life insurance ( $25,000 each), long-term disability (two-year any/own definition of disability for 67 percent of their salary) and a 80/20 co-pay health and dental plan. They feel lucky as they know the cost of health care can become very expensive with twins on the way. Jamie will go on maternity leave for 12 months and receive the maximum taxable EI benefit of $543 per week. They will use savings to supplement the income while she is on maternity leave. Upon the birth of his two children, Ross immediately had worries about being able to provide for the growing family: diapers, formula, post-secondary expenses times two! What if something happened to him or Jamie Lee? How would the surviving parent be able to provide for such a large family? What if they were to become disabled or were diagnosed with a critical illness? Current Financial Situation Assets (Jamie Lee and Ross combined): Chequing account: $4,300 Savings account: $25,200 Emergency fund savings account: $18,000 TFSA balance: $24,000 Car: $11,500 (Jamie Lee) and $19,000 (Ross) Liabilities (Jamie Lee and Ross combined): Student loan balance: $0 Credit card balance: $1,500 (they intend to pay this off immediately) Car loans: $8,000 Income: 1. Jamie Lee: $45,000 gross income ( $31,500 net income after taxes) NOTE this will change to the EI benefit a week prior to birth. Page325 Ross: $73,000 gross income ( $60,800 net income after taxes) Monthly Expenses: Mortgage: $1,542.77 Property taxes: $400 Homeowner's insurance: $150 Utilities: $350 Food: $700 (includes diapers now) Gas/maintenance: $485 Credit card payment: $1,500 (as they will pay it off in full this month) Car loan payment: $389 Entertainment: $150 RRSP: $300 Questions 1. Within days of the twins' arrival, Jamie Lee and Ross began researching and comparing various companies for the purchase of a life insurance policy. What characteristics should they look for when choosing a life insurance company? What sources could they reference for help? 2. Jamie Lee and Ross need to ensure that the surviving spouse and the children will not experience financial hardship in the event of a loss. Using the income replacement method and considering Ross's salary in the calculation, how much life insurance will they need? 3. With so many policy variations to choose from, Ross and Jamie Lee are unsure which company is offering the most competitive rates. How will they be able to compare the rates between the various companies? 4. Jamie Lee and Ross have a limited budget for life insurance, given that they also have the additional present-day expenses of the twins to consider. What type of life insurance would you recommend for the family at this life stage, and what are its associated advantages and disadvantages? 5. What are some features that would become important for them when looking at their group health and dental benefits plans? 6. What feature of the long-term disability component of the employer-sponsored plan should create a concern from a planning standpoint and how could they alleviate this concern? 7. What other insurance could they consider to add as a rider or as a stand-alone policy to protect themselves from financial hardship if either one were diagnosed with cancer
