Life · Chapter 10 · Amount of Coverage
Capital Needs Analysis (Retention vs Liquidation)
Definition
A needs-approach method determining both immediate lump-sum needs (final expenses, death taxes, mortgage redemption, emergency and education reserves) and future income needs. Capital liquidation spends down principal for income; capital retention provides enough capital to generate income without depleting principal.
Exam tip
Retention needs MORE insurance than liquidation — the principal must survive intact.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms