Need Analysis Method Is a More Detailed Approach Than Multiple-Of-Earnings

question 92

Multiple Choice

Need analysis method is a more detailed approach than multiple-of-earnings method. This method considers both financial obligations and financial resources of the insured and his or her dependents. Which of the following steps is/are involved in this method?

• A) Estimate the total economic resources needed if the individual were to die
• B) Determine all financial resources that would be available after death, including existing life insurance and pension plan death benefits
• C) Subtract available resources from the amount needed to determine how much additional life insurance is required
• D) All of these

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Definitions:

Giffen Good

A product for which demand increases as its price increases, contrary to the standard demand model, due to the interplay of income and substitution effects.

Income Effect

The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.

Price Decrease

A reduction in the cost of a good or service, which can increase consumer demand but may decrease supplier profits.

Consumer's Optimal

The point at which the combination of goods and services purchased by a consumer provides maximum satisfaction or utility, given the consumer's income and the prices of goods.