Question

There are various methods used to calculate how much insurance cover an individual should take. In which method is the present value of future earning potential of an individual used as a yardstick to calculate how much insurance cover an individual should take?

a.

Need analysis method

b.

Human life value method

c.

Income multiple method

d.

Expense substitution method

Posted under IC22 Life Insurance Underwriting

Answer: (b).Human life value method Explanation:The human life value method is a method used to calculate the present value of an individual's future earning potential. This method takes into account the individual's age, gender, occupation, annual income, and retirement age to determine the present value of their future income. Based on this calculation, the individual's insurance cover amount is determined. This method is considered to be more accurate than the income multiple method as it takes into account several factors that affect an individual's earning potential.

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Q. There are various methods used to calculate how much insurance cover an individual should take. In which method is the present value of future earning potential of an individual...
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