What are the two approaches used to evaluate insurance needs?

The Human Value Approach and the Needs Approach are widely recognized methods for evaluating insurance needs.

The Human Value Approach focuses on assessing the economic value of a person's life. This involves determining the financial contribution the individual provides to their dependents and the potential loss of income should the individual pass away. This approach typically considers factors such as current earnings, future earning potential, and the number of years the individual is expected to work. By calculating this value, insurance professionals can recommend an appropriate coverage amount that would secure the financial future of the dependents.

The Needs Approach, on the other hand, takes into account the specific financial obligations and goals of the individual or family. This involves analyzing current and future expenses such as mortgage payments, education costs, and any debts. It assesses the amount of money needed to cover these expenses if the insured individual were to pass away. This approach allows for a more personalized evaluation of insurance needs, catering to the unique circumstances of the insured.

Together, these two approaches provide a comprehensive understanding of a person's insurance needs, ensuring that they are adequately covered based on their life situation and financial responsibilities.