The multiple of earnings approach to evaluating life insurance needs is simplistic but can be unreliable.

Question

Quizplus · Accepted Answer

The multiple of earnings approach only considers the insured's income and does not take into account their specific financial obligations, such as outstanding debts, future expenses, or inflation. Therefore, it may not accurately reflect the amount of life insurance coverage needed for the insured's particular situation.

The Multiple of Earnings Approach to Evaluating Life Insurance Needs