Needs Approach

The needs approach is a method of calculating how much life insurance you need. It is based on your current and future financial obligations, and it takes into account factors such as your age, income, and dependents.

To use the needs approach, you first need to list all of your current financial obligations, such as your mortgage, car payments, and student loans. You then need to estimate your future financial needs, such as the cost of your children's education and your retirement. Once you have a list of your current and future financial needs, you can use the following formula to calculate how much life insurance you need:

[Current financial obligations] + [Future financial needs] = [Total life insurance need]

For example, if you have $100,000 in current financial obligations and $200,000 in future financial needs, you would need a life insurance policy of $300,000.

The needs approach is a conservative method of calculating how much life insurance you need. It is based on your current and future financial obligations, and it does not take into account any other factors, such as your personal goals or values. If you are looking for a more comprehensive approach to life insurance planning, you may want to consider using the cash-value approach or the income replacement approach.

The needs approach is a good starting point for anyone who is trying to figure out how much life insurance they need. It is a simple and straightforward method that can help you to get a ballpark figure for your life insurance needs. However, it is important to remember that the needs approach is just a starting point, and you may need to adjust your life insurance needs based on your individual circumstances.