Needs Approach
Barron's Insurance Dictionary:
Top
Needs Approach
Personal insurance method used to analyze the amount necessary to maintain a family in its customary life-style, should the primary wage earner die. This includes such considerations as:
1. immediate needs (“cleanup fund”)—expenses associated with final medical treatments and burial, inheritance taxes, estate taxes, probate costs, outstanding debt.
2. continued income—while children are still in school and depend on family support.
3. continued income—for the surviving spouse after children no longer depend on family support.
4. continued income—to pay a mortgage, education expenses, emergency expenses, and miscellaneous expenses.
5. retirement fund—for the surviving spouse.
From the sum of these expenses, subtract sources of income available to the surviving spouse (Social Security, investments, employee benefit plans such as group life insurance and pensions), to arrive at a final figure on which to base the amount of life insurance the wage earner should consider.
1. immediate needs (“cleanup fund”)—expenses associated with final medical treatments and burial, inheritance taxes, estate taxes, probate costs, outstanding debt.
2. continued income—while children are still in school and depend on family support.
3. continued income—for the surviving spouse after children no longer depend on family support.
4. continued income—to pay a mortgage, education expenses, emergency expenses, and miscellaneous expenses.
5. retirement fund—for the surviving spouse.
From the sum of these expenses, subtract sources of income available to the surviving spouse (Social Security, investments, employee benefit plans such as group life insurance and pensions), to arrive at a final figure on which to base the amount of life insurance the wage earner should consider.
| Necessities of Life, Ncci, Navigation Risk Insurance | |
| Neglect, Negligence, Negligence, Imputed |
Investopedia Financial Dictionary:
Top
Needs Approach
A method of calculating how much life insurance is required by an individual/family to cover their needs (i.e. expenses). These include things like funeral expenses, legal fees, estate and gift taxes, business buyout costs, probate fees, medical deductibles, emergency funds, mortgage expenses, rent, debt and loans, college, child care, private schooling and maintenance costs. The needs approach contrasts the human-life approach.
Investopedia Says:
The needs approach is really a function of two variables:
1. How much will be needed at death to meet obligations.
2. How much future income is needed to sustain the household.
When calculating your expenses, it is best to overestimate your needs a little. Yes, you'll be buying and paying for a little more insurance than you need, but if you underestimate, you won't realize your mistake until it's too late.
1. How much will be needed at death to meet obligations.
2. How much future income is needed to sustain the household.
When calculating your expenses, it is best to overestimate your needs a little. Yes, you'll be buying and paying for a little more insurance than you need, but if you underestimate, you won't realize your mistake until it's too late.
Related Links:
Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected. Life Insurance: Putting A Price On Peace Of Mind
No one is immune to the possibility of one day needing long-term care - and the costs can deplete a life savings. Long-Term Care Insurance: Who Needs It?
Don't be caught unprepared - find out what to look for in LTC insurance policies. Taking The Surprise Out Of Long-Term Care
Post a question - any question - to the WikiAnswers community:
Copyrights:
Barron's Insurance Dictionary
Dictionary of Insurance Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
Read more
Mentioned in
Cleanup Fund
(insurance term)
Educational Fund
(insurance term)
Emergency Fund
(insurance term)
Financial Needs Approach
(finance term)
situation semantics
(philosophy)
» More