Washington Life Producer Practice Exam

Which of these is a method of determining the level of funds required for ongoing support in the event of the breadwinner's death?

1. Human life value

2. Liquidity analysis

3. Net worth evaluation

4. Cost-benefit analysis

The correct answer is: Human life value

The correct method for determining the level of funds required for ongoing support in the event of the breadwinner's death is based on the concept of human life value. This approach assesses the economic value of an individual's future earnings and contributions, effectively quantifying the financial impact their death would have on dependents and the family unit. By calculating the human life value, one considers factors such as the breadwinner's current income, potential future earnings, and the financial needs of those who depend on them. This method emphasizes the monetary worth of a person's life and their role in supporting their family, thereby providing a clear framework for understanding how much coverage is necessary to sustain dependents after the breadwinner's passing. Other approaches, while useful for different financial assessments, do not specifically tailor to the requirements needed in the event of a death. Liquidity analysis focuses on how easily assets can be converted into cash, net worth evaluation looks at overall assets and liabilities, and cost-benefit analysis evaluates the advantages and disadvantages of specific financial decisions rather than providing an estimate of ongoing financial support in the case of a loss. Thus, human life value stands out as the most relevant method in this context.