Needs Approach

What Does Needs Approach Mean?

The needs approach is a method used to determine the amount of life insurance required to cover an individual or family’s necessities.

This approach considers two key variables: the immediate financial obligations that must be met at the time of death and the future income needed to sustain the household without falling into poverty.

Insuranceopedia Explains Needs Approach

The needs approach calculates the amount of life insurance required by summing all current and potential expenses and then subtracting the total value of existing assets from that amount.

This approach considers a wide range of expenses, including:

• Funeral costs
• Legal fees
• Estate taxes
• Business buyout costs
• Probate fees
• Medical deductibles
• Emergency funds
• Mortgage expenses or rent
• Debt and loan repayment
• College fees and tuition
• Childcare and school fees
• Maintenance costs