Question

Which of the following statements regarding ways to determine the proper amount of life insurance is CORRECT?

A) There are two basic approaches to determining the amount of life insurance that is needed: the human life value approach and the needs approach.
B) When using the needs approach to determine the proper amount of life insurance to purchase non-insurance-type assets, such as pension benefits or personal savings, are not factors in the calculation.
C) The most popular method today for determining the proper amount of life insurance is the human life value approach.
D) The needs approach considers only the most immediate financial concerns, without regard for family financial goals such as college education for children or retirement income for a surviving spouse.

Answer 1

The correct answer is A) There are two basic approaches to determining the amount of life insurance that is needed: the human life value approach and the needs approach, which both consider different factors such as future obligations and income replacement.

Step-by-step explanation:

The correct statement regarding ways to determine the proper amount of life insurance is: A) There are two basic approaches to determining the amount of life insurance that is needed: the human life value approach and the needs approach. While the human life value approach focuses on the economic loss or income replacement value of the insured, the needs approach takes into consideration a comprehensive analysis of future financial obligations and goals, such as debt, income replacement, education for dependents, and retirement for the survivor. Non-insurance assets like personal savings or pension benefits are very much a part of the calculation in the needs approach, contrary to what statement B suggests. Statement C is incorrect, as the needs approach is more widely used today. Statement D is also incorrect since the needs approach includes long-term financial goals and not just immediate financial concerns.