Which approach to determining life insurance needs is based on an individual's salary and age?

The correct answer is the Earnings Multiple Approach, as it calculates life insurance needs predominantly based on an individual’s salary and age. This method operates on the premise that a certain multiple of the individual’s annual income should be used to establish the amount of life insurance coverage necessary to provide financial security for dependents after the individual’s death.

For instance, a common multiplier might be five to ten times the annual income, depending on the individual's age, financial dependents, and life stage. This approach is straightforward and relies on readily accessible financial information, making it appealing for many individuals looking to determine adequate life insurance coverage.

The other approaches differ fundamentally in their methodologies. The Needs Approach focuses on the specific financial needs of the dependents and the anticipated expenses they will incur (such as housing, education, and daily living costs) after the insured's death. The Underwriting Method is related to evaluating an individual’s risk profile for insurance purposes, not determining the amount of coverage based on income. Risk Classification categorizes individuals based on their risk levels but does not provide a basis for calculating life insurance needs in the context of salary or age. Hence, the Earnings Multiple Approach is the most suitable and direct method for assessing life insurance requirements based on an individual’s financial