Sarah, age 35, is a successful small business owner with a spouse and two young children. Her current annual income is $150,000, and she expects her business to continue to grow. Her family relies significantly on her income. She has a $500,000 mortgage, $100,000 in consumer debt, and wants to ensure her children's education can be fully funded ($200,000 per child in today's dollars, expected to be needed in 15-20 years). Her spouse earns $60,000 annually. What is the most appropriate approach for calculating Sarah's immediate life insurance needs?

Question: Sarah, age 35, is a successful small business owner with a spouse and two young children. Her current annual income is $150,000, and she expects her business to continue to grow. Her family relies significantly on her income. She has a $500,000 mortgage, $100,000 in consumer debt, and wants to ensure her children's education can be fully funded ($200,000 per child in today's dollars, expected to be needed in 15-20 years). Her spouse earns $60,000 annually. What is the most appropriate approach for calculating Sarah's immediate life insurance needs?

Answer options:

• A human life value approach, focusing on her future earnings potential. ✅ A needs-based analysis, considering specific financial obligations and goals.
• A multiple of income approach, typically 7-10 times her annual salary.
• A capital retention approach, aiming to maintain her family's current lifestyle indefinitely.

Correct answer: A needs-based analysis, considering specific financial obligations and goals.

Explanation: A needs-based analysis is the most appropriate for Sarah's situation as it considers her specific immediate financial obligations (mortgage, debt) and future financial goals (children's education, income replacement) to arrive at a more accurate and personalized insurance amount.