Question

In: Finance

Using the expense approach to assessing life insurance needs is better than the income approach for...

  1. Using the expense approach to assessing life insurance needs is better than the income approach for all of the reasons except:
    1.      It is more detailed.
    2.     it assess future needs that may not be covered by present income levels.
    3.      It takes into account inflation.
    4.     It takes into account present assets that could be used to finance future needs.

Solutions

Expert Solution

The expense approach is better than income approach except this reason :

c. It takes into account inflation

The expense approach of assessing life insurance needs doesn't consider the inflation. But the income approach of assessing life insurance needs will take into account inflation. So all other options will be taken into account by expense approach. It is more detailed than the income approach in many ways. It considers the future needs of the insured which is not comes under the coverage of current income state. It also consider current assets that can be used for the future needs. So Inflation is not taken into account by the expense approach of assessing life insurance needs.


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