South Carolina Life and Health Practice Exam

What must be determined when calculating life insurance needs using the Needs Approach?

1. The family's desired lifestyle

2. The income earner's debts only

3. The family's financial objectives if the income earner were to die or become disabled

4. The projected expenses for education only

The correct answer is: The family's financial objectives if the income earner were to die or become disabled

When calculating life insurance needs using the Needs Approach, it is crucial to assess the family's financial objectives in the event that the income earner were to die or become disabled. This comprehensive analysis includes not only immediate expenses, such as debt repayment and living costs but also long-term financial goals, including future education costs, retirement savings, and any other financial needs the family may have to maintain their standard of living. The Needs Approach focuses on understanding the financial resources required to support the family after the loss of the income earner. By clearly defining these objectives, families can ensure that they have the appropriate coverage to meet their future needs and maintain financial stability during a challenging time. This strategic planning aligns closely with the overall aim of life insurance, which is to provide financial security and peace of mind for loved ones left behind. In comparison, concentrating solely on the family's desired lifestyle, debts only, or projected expenses for education does not encompass the full spectrum of financial requirements that may arise. These aspects are certainly part of the bigger picture, but they do not capture the broader financial planning framework necessary for effective life insurance coverage under the Needs Approach.