Life is the most uncertain reality of this universe. A lot is lost when a life is lost. To assign a value to life, we cannot attach a price tag to it. However, we can try and secure the monetary value of life through insurance. 

To find how much insurance someone needs, the major factor widely used across the insurance industry is the Human Life Value or HLV. HLV, in simple terms, is the monetary value attached to a person.

It is the present value of all future income a person would expect to earn for their family. It directly indicates the financial loss a family would suffer in case of the untimely death of the family's breadwinner.

Dr Solomo n S. Huebner invented the concept of human life value. This calculation helps individuals determine life insurance needs based on their income, savings, expenses, liabilities.

What Is a Human Life Value Calculator?

It is essential to determine the adequate amount of insurance cover that your family would need in your absence, to deal with the financial obligations. An HLV calculator does just that!

Human Life Value calculator is an online tool that utilizes the concept of Human Life Value and accordingly calculates that helps individuals to determine the right amount of insurance cover required by you.  they need to purchase. Currently, there are numerous HLV calculators available online.

What Factors Affect Human Life Value?

The key factors that affect Human Life Value include: 

• Age

• Annual Income

• Monthly expenses (Household expenses, EMIs, school fees etc.)

• Outstanding loans and other liabilities

• Possible future expenses (child’s higher education, buying a house, etc.)

• Existing Investments

• Existing life insurance cover 

There are two common methods used to calculate HLV

Income Replacement

This method is based on the premise that the insurance proceeds must be sufficient enough to replace the lost earnings of the deceased breadwinner of the family. So, by this method,

Insurance Cover= Current Annual Income x Number of Years left for Retirement

It's a simple method that gives you a close idea of the required sum Assured, but a significant drawback is that it does not factor in the inflation, income rise, and the major expenses on the way.

Need-Based Method

This method calculates the HLV based on several factors and consider inflation and discounting factor too. 

It follows the following steps to determine HLV:

Step 1: Determine your current income.

Step 2: Subtract your expenses, insurance premiums, and income tax payments.

Step 3: Identify the number of earning years remaining before your retirement.

Step 4: Find the inflation and discounting factor rate.

Step 5: Determine the present value of the earning left after including inflation.

The above calculation is a bit complex and an HLV calculator simplifies it for you. 

A Human Life Value Calculator helps you to assess your requirements and accordingly determines the adequate insurance cover to secure your family. It takes into account all the income sources and liabilities. Factors in the numbers of earning years and the applicable inflation to arrive at the present value of all future incomes. 

You can do this in just a few simple steps: 

Step 1: Enter your personal details like annual income and current age.

Step 2: Enter your liabilities details like monthly expenses, heavy expenses, and outstanding loans. 

Step 3: Enter your investment details like existing savings and existing insurance.

The calculator automatically factors in the other variables like assumed inflation rate and retirement age. 

There you go! In just a few simple  steps you arrive at a figure that reflects an estimated protection cover that you need to secure the future of your family. 

What Is the Importance of HLV?

As already said, you cannot measure the importance of a human life but what you can do is, determine the financial requirement that the dependents would need in case of an unfortunate demise of the breadwinner. HLV fulfils this objective. Here are the two features that make HLV important:

1. Choose an adequate life cover for your dependents

You would never want your family to struggle with financial liabilities in your absence. Hence, it is of utmost importance to calculate an adequate life cover for your family. Human Life Value is an indicator for the same.

2. Takes inflation into account

When we calculate how much our family would need to deal with financial requirements in our absence, we often miss out factoring in inflation and liabilities. 

Liabilities don’t end with the breadwinner, instead, they come down heavily on the family after the earning member’s demise.

Similarly, inflation reduces the value of our savings and augments the expenses, thus hitting our financial planning if we haven’t factored in Inflation.

Human Life Value calculation considers inflation and liabilities and thus, helps you arrive at a much better indicative figure for your insurance coverage requirement. 

Now that you know the importance of calculating the right amount of insurance coverage to secure your family’s future, time to use our Human Life Value Calculator.