Need analysis method is a more detailed approach than multiple-of-earnings method. This method considers both financial obligations and financial resources of the insured and his or her dependents. Which of the following steps is/are involved in this method?
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A. B. C. D.D
The need analysis method is a comprehensive approach to determine the amount of life insurance coverage needed by an individual. This method takes into account both the financial resources and the financial obligations of the insured and their dependents. It involves the following steps:
A. Estimate the total economic resources needed if the individual were to die: This step involves identifying the financial obligations that would arise in the event of the individual's death, such as outstanding debts, funeral expenses, estate taxes, and ongoing living expenses for the insured's dependents. The sum of these obligations represents the total economic resources needed if the individual were to die.
B. Determine all financial resources that would be available after death, including existing life insurance and pension plan death benefits: This step involves identifying all the sources of financial support that would be available to the insured's dependents after the insured's death. This could include existing life insurance policies, pension plan death benefits, and any other sources of income or assets that could be used to meet the financial obligations identified in step A.
C. Subtract available resources from the amount needed to determine how much additional life insurance is required: This step involves subtracting the total financial resources identified in step B from the total economic resources needed identified in step A. The difference represents the additional life insurance coverage needed to ensure that the insured's dependents would be able to meet their financial obligations in the event of the insured's death.
D. All of these: All the steps mentioned above are involved in the need analysis method.
In summary, the need analysis method is a more detailed approach than the multiple-of-earnings method for determining the appropriate amount of life insurance coverage for an individual. It takes into account the individual's financial obligations and financial resources, and involves estimating the total economic resources needed, identifying all available financial resources, and determining the additional life insurance coverage needed to meet the remaining financial obligations.