What are the two methods for calculating life insurance needs?

The correct answer identifies two widely recognized methods for calculating life insurance needs: the Human Life Value method and the Needs Analysis method.

The Human Life Value method focuses on the economic value of an individual's future earnings. It involves estimating the present value of the income that a deceased individual would have contributed to their dependents. This approach considers factors like current income, projected career growth, and the years until retirement, allowing for a calculation that reflects the lifetime earnings potential of the individual.

The Needs Analysis method, on the other hand, takes a broader perspective by evaluating the financial needs and obligations of the dependents in the event of the policyholder's death. This includes expenses such as housing, education, healthcare, and other living expenses, as well as any existing debts that need to be settled. The goal of this method is to ensure that the policyholder’s dependents will have sufficient financial resources to maintain their standard of living without the deceased's income.

Together, these two methods provide a comprehensive framework for determining the appropriate amount of life insurance coverage required to secure the financial future of dependents. This ensures that both the potential loss of income and the specific financial needs of loved ones are adequately addressed.