Two Incomes, One Policy Gap
Marcus (38) and Elena (36) have two children, ages 4 and 7. Marcus earns $95,000; Elena earns $72,000. Their mortgage is $310,000 with 27 years remaining; they have $22,000 in combined savings and $140,000 in Marcus's 401(k). Marcus has a $500,000 20-year term policy taken out five years ago; Elena has no life insurance. Elena's employer offers group term life at 1x salary with no medical underwriting; Marcus's employer offers none. Elena was treated for postpartum cardiomyopathy two years ago and now has normal cardiac function but takes a beta-blocker. Their monthly obligations total $6,800, of which $2,900 is the mortgage and $1,100 is childcare. They want to know whether Elena should buy the group coverage or an individual policy.
1. Estimate Elena's life insurance need using an income-replacement and obligations approach, and state key assumptions.
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A defensible estimate combines income replacement, debt, education, and final expenses, net of existing resources.
- Income replacement: $72,000 gross. A common shortcut is 10–12x income → $720,000–$864,000. A needs-based method: replace ~70% of gross ($50,400) for the 14 years until the younger child is 18, then a reduced amount - roughly $700,000–$800,000 present value at a 4–5% discount rate.
- Mortgage: $310,000 (or her share if Marcus keeps paying).
- Childcare/education: $1,100/month childcare for ~14 years plus college funding goals.
- Final expenses: $10,000–$15,000.
- Offset: $22,000 savings and her share of the 401(k); group 1x salary = $72,000.
Rough need: ~$800k income replacement + $310k mortgage + education − $72k group − $22k savings ≈ $1.0–1.1 million, before considering that Marcus's income continues. Because Marcus's income covers much of ongoing household cost, a lower figure (e.g., $600k–$750k) is also defensible - the key is stating assumptions (replacement ratio, years, discount rate, whether mortgage is netted).
2. Compare the group term offer with an individual policy given Elena's cardiac history, and identify the underwriting and portability risks.
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Group term (1x = $72,000): Guaranteed issue during the open enrollment window means her cardiomyopathy history is not underwritten - a real advantage, since individual underwriting could decline or rate her. But the amount is far below her ~$1M need, the rate is often age-banded and rises, coverage ends or becomes expensive at termination of employment, and it is not portable at the group rate. Group coverage also typically has a conversion privilege to permanent coverage at attained-age rates - expensive but useful if she later becomes uninsurable.
Individual policy: Requires full underwriting; a two-year-old postpartum cardiomyopathy with recovered function and ongoing beta-blocker therapy will likely draw a rated offer or postponement rather than a clean standard rate. The strategic move is to apply now while her function is normal and stable, because a future cardiac event could make her uninsurable. A convertible term policy locks in future insurability.
Recommendation: Take the group coverage immediately as a floor (no downside, no underwriting), and simultaneously apply for a large individual convertible term policy. Do not rely on group alone - it is a fraction of the need and tied to employment. Also flag that Marcus's $500,000 term expires in 15 years, when the children are 19 and 22 - review that too.