How to Determine Human Life Value?

Human Life Value is calculated to determine the optimum quantity of life insurance that is needed to an earning person. This HLV is determined by three factors i.e. your age, current and future expenses and current and future income. Simply put, this is the present value of an individual’s future earnings.

An individual should calculate his Human Life Value so that he can invest accordingly in the insurance plans. These plans may give his family adequate finances and security in the event of his death.

The main purpose of life insurance policy is to compensate a financial loss on the occurrence of unanticipated death. So HLV is calculated at the time of purchasing an insurance plan for an earning person. Because if a person dies at the beginning of the policy, claim amount i.e. equal to Human Life Value should be able to give financial support to dependent members during his remaining future earning period. For calculating HLV some factors are required:-

The expected net monthly financial loss to the dependents on the death of the insured person.

The expected future earning period of the insured person when he takes the Insurance policy.

The expected Interest rate at which the HLV amount can be invested.

For calculating the net value expected monthly financial loss to the dependent member, the gross monthly income of an insured person is deducted from his earning expenses such as income tax, professional tax or other job expenses, his personal share given to the family and many more.

The expected future earning period can be ascertained easily in case of employee group. The expected Interest rate can be calculated through prevailing investment or bank agencies. It is preferable to calculate HLV through HLV chart.

To sum up, Human Life Value is essential before purchasing any insurance policy. Because it may help you to get right compensation and right insurance cover for your loved ones.

Human Life Value
Human life value