Final answer:
The needs approach in determining the amount of life insurance takes into account the insured's financial needs and obligations in the event of their death.
Step-by-step explanation:
The needs approach is a method used to determine how much life insurance coverage an individual should have. It takes into account the specific financial needs of the insured and their dependents in the event of their death.
When utilizing the needs approach, the insured's potential expenses and financial obligations, such as outstanding debts, mortgage payments, education costs, and living expenses, are considered. The aim is to ensure that the life insurance coverage is sufficient to meet these needs and provide financial stability for the insured's loved ones.
It is important to note that the needs approach does not assume that the insured will die, but rather focuses on preparing for the potential financial impact of their death.