What are the two main approaches to determining a person's life insurance needs?

The two main approaches to determining a person's life insurance needs are the human life value approach and the needs approach.

The human life value approach focuses on assessing the economic value of an individual’s life, which is calculated by considering factors such as their earnings potential, future income, and contributions to dependents. This approach helps in establishing a monetary value that reflects what a person would need to provide for their family or dependents in the event of their death. It essentially aims to quantify the financial impact of losing that individual.

On the other hand, the needs approach evaluates the specific financial goals and obligations of the individual's dependents after their death. This approach takes into account immediate needs, such as funeral expenses and outstanding debts, as well as long-term considerations, such as future education costs for children and ongoing living expenses for a surviving spouse. By prioritizing the family's financial needs, this method helps ensure that they have adequate coverage to maintain their quality of life in the absence of the policyholder.

Together, these two approaches provide a comprehensive understanding of how much life insurance coverage a person may require to protect their loved ones financially.