What approach is used to determine the amount of insurance an individual requires based on their financial objectives?

The needs approach is focused on assessing an individual's specific financial obligations and goals in order to determine the amount of insurance necessary to meet those needs. This method looks at various factors, including debts, ongoing living expenses, future educational costs, and any other financial responsibilities that might arise. By considering these elements, the needs approach provides a tailored solution that reflects the individual's unique circumstances and objectives.

This approach is especially helpful in ensuring that the policyholder's loved ones will not face financial hardship in the event of their untimely passing. It emphasizes a pragmatic assessment of needs rather than relying solely on simple calculations or one-size-fits-all metrics.

Other methods, such as the human life value approach, focus on evaluating an individual’s potential future earnings as a basis for determining insurance coverage. In contrast, estate planning deals primarily with managing and distributing assets after death, and the viatical approach involves selling a life insurance policy for its cash value before the insured's death, typically due to a terminal illness. While these approaches have their own merits, the needs approach provides a comprehensive assessment grounded in an individual’s current and future financial requirements, making it the most suitable answer for determining insurance needs based on financial objectives.