The earnings multiple approach is based on the notion that you want to replace a stream of annual income that's lost due to the death of a breadwinner.

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The earnings multiple approach is commonly used in life insurance to determine the amount of coverage needed to replace the income of a breadwinner in the event of their death. The approach calculates a multiple of the breadwinner's current income to provide a stream of income to their dependents for a set number of years.

The Earnings Multiple Approach Is Based on the Notion That