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# Calculate Human Life Value in Insurance

#### IndianMoney.com Research Team | Updated On Monday, October 08,2018, 04:06 PM

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### 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

### Particulars

Raj's age

Years

30

Age of spouse

Years

27

Life expectancy of spouse

Years

70

Age of child

Years

3

Child's share of monthly household expenditure

%

10

Child will remain dependent till

Years

22

Monthly household expenditure

Rs

40,000

Of the above, how much is spent on Raj

Rs

10,000

Expected inflation in household expenditure

%

5

Money to be set aside for child's education (in present value terms)

Rs

10,00,000

Money to be set aside for child's marriage/other needs (in present value terms)

Rs

7,50,000

Outstanding loans

Rs

15,00,000

Other liabilities

Rs

5,00,000

Medical expenditure/emergency fund

Rs

5,00,000

Rate of return on low risk securities/deposits

%

8

Human Life Value

Rs

16,645,475

If the rate of return on low risk securities/deposits is

%

7

Revised Human Life Value

Rs

18,183,996

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

### Particulars

Annual Gross Income

10,00,000

Less : Expense on Self including taxes

300,000

Contribution to Family Standard of Living

700,000

Multiplying factor

15

Gross Human Life Value

1,05,00,000

Less : Liquid Assets

600,000

1,000,000

Add : Amount to fulfill family needs like daughter’s marriage & son’s education

2,000,000

Human Life Value

1,29,00,000

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.

### Multiplying Factor

Upto 35 years

25 times

36 to 40 years

20 times

41 to 45 years

15 times

46 to 50 years

12 times

51 to 60 years

10 times

61 to 65 years

5 times

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.

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## IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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