Question

Which of the following methods should be used to calculate the amount of life insurance needed, taking into account insured wages and inflation?

1) Only insured wages should be considered
2) Only inflation should be considered
3) Both insured wages and inflation should be considered
4) None of the above

Answer 1

To calculate the amount of life insurance needed, both insured wages and inflation should be considered in order to cover financial obligations and account for changes in the cost of living over time.

Step-by-step explanation:

To calculate the amount of life insurance needed, both insured wages and inflation should be considered.

The insured wages represent the individual's income and financial obligations that would need to be covered in the event of their death. This can include expenses such as mortgage payments, student loan debt, and childcare costs.

Inflation should also be taken into account because it affects the purchasing power of money over time. As the cost of living increases, the amount of insurance needed to maintain the same standard of living also increases.