Calculate Human Life Value in Insurance

Human Life Value

The concept of Human Life Value in Insurance is something that we all hear about especially from the insurance agent but hardly have we known to calculate. The reason being there is no definitive source of information on the subject. Here we have an example to understand.

Example 1

Here's an example to understand this better. Let's calculate the HLV of Raj, who is married and has a child. In the table all the information about Raj, his family and their needs is provided. A couple of points from the table need to be explained in more detail

Let see another example, where HLV is calculated for Mr. Vikas Rao based on the present needs and income. Mr. Vikas Rao aged 41 years has an annual income of Rs.10 lacs, spends Rs.3 lacs on his personal expenses (including Taxes). He has Fixed Deposits of Rs.6 lakh. He also has a loan of Rs.10 lacs and plans to spend Rs.10 lacs each on his son’s education and his daughter’s marriage. His human life value will be as follows.Example 2

Expenditure on self-Maintenance (1/3 of gross income for people. This also includes varying tax liabilities) Liquid assets .These would be available to the family in the event of the death of the breadwinner. It does not include the value of other assets like property or jewelery since it is the value of other assets like property or jewelery since it is assumed that the family would continue using these assets.

The Human Life Value (HLV) is just indicative and a starting point in reference to your current ability to set aside money for you and your family’s future financial security. There are ready calculators available for calculating the HLV based on current and future income and expenses. You can also contact your financial advisor for arriving at the optimum amount of cover through HLV.

Once you are convinced with the amount, you can choose various life insurance plans for covering yourself. Policies like term assurance plans, traditional plans and Unit linked plans are available with all the insurance companies providing. While term assurance & whole life insurance plans are purest form of insurance with no returns, Unit Linked Plans can give you good returns in the long term.