What is human life value ?
Human Life Value (HLV) refers to the economic value of a person’s life in financial terms, typically used in insurance and financial planning. It calculates the monetary worth of an individual based on their future income, contributions to dependents, and expenses over a certain period. This value helps to estimate the amount of life insurance coverage a person might need to ensure their dependents are financially secure in case of their untimely death.
Factors Considered in Calculating Human Life Value:
- Income: The current and projected future earnings of an individual.
- Expenses: Regular household expenses and personal expenses that would continue in the person's absence.
- Years to Retirement: The number of years the individual is expected to work and earn an income.
- Inflation: The expected increase in costs of living over time.
- Debt: Outstanding liabilities such as loans or mortgages.
- Savings and Investments: Current savings and investment assets that would contribute to the family's financial needs.
Purpose of Human Life Value:
- Life Insurance: HLV helps to determine the appropriate amount of life insurance coverage needed to replace the deceased person’s income and cover future expenses.
- Financial Planning: It serves as a guide for understanding the financial impact of losing a family member and planning for long-term financial stability.