Last week, we discussed  the shortfalls of life insurance provided by employers, today we’re taking a look at a case study – one that demonstrates the disastrous consequences that can arise from not having enough life protection.

Many people assume adequate cover will be offered through their employment, however this is not always the case.

Global insurers Swiss Re found in a 2013 report that more than three-quarters of UK employers do not provide these types of benefits to employees, whether through life insurance, income protection or critical illness cover.

And where employers do provide cover, it may not always be enough.

In the tragic case of Pennie Davis (image for illustration only), her five children were left struggling financially after she was murdered last year.

Pennie did not have any life insurance, but was ‘covered’ by a death-in-service benefit scheme, through her supermarket employer, Sainsbury’s. Under the conditions of the cover, Davis’s family received a paltry payout of just £1,100 on her death.

They were deeply shocked when they realised that the first payment was to be the only one – just four week’s salary. It was only when Sainsbury’s insisted this small figure was correct, that Pennie’s family looked into the policy details more closely.

Death-in-service benefit for Sainsbury’s employees is linked to their pension. Exactly how much is paid in is up to each individual – the first and cheapest option is “Start Up” where 1% of your salary is paid in, and the second is “Step Up”, where those who can afford to pay in more can do so if they wish.

For both of these options, Sainsbury’s will pay a lump sum if the individual is to die whilst still under employment. However, there is a huge difference in the two amounts; “Start Up” contributors, like Pennie Davis, receive just four weeks’ basic wage. “Step Up” contributors receive a whopping six times their annual wage.

The Davis family put in an appeal against the small sum, which was turned down, however Sainsbury’s offered them a further £1,000 through the company’s hardship fund – this was used to cover some of the funeral costs.

Pennie’s sister, Nicola Lambert said to the Guardian, “We were disappointed and a bit surprised at how Sainsbury’s treated us. It’s not that the company is short of money. They remunerate their employees pretty well, particularly at the high end. I did feel it was unjust.”

She added: “We still haven’t sorted out how we are going to support the family on an on-going basis. I know for a fact that various family members are pitching in when they can.”

Pennie Davis’s sad story highlights how important it is to be aware of death-in-service benefit details. Often, comprehensive life insurance is needed to ensure a family’s needs would be met in the event of death.