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It is easy to assess the value of objects such as houses, vehicles, etc. General insurers ascertain the value of such products to provide insurance coverage. It is quite a simple and easy process. Does the question arise that how do you cover the risk to human life? The human life value cannot be calculated in numbers. However, one has to ascribe a value to human life for active insurance coverage.
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Insurance providers require human life value to assess the price of the cover while life assured needs human life value to get an idea about the insurance cover they require. The Human Life Value (HLV) is computed through a number of methods by considering certain factors such as savings, income, and liabilities of a person. It helps in determining the income loss and the increase in liabilities during the death of the sole earning member of the family.
Human Life Cover is an insurance cover that your family would need to live a burden-free life in case of your absence. It is the amount of money that helps your family to survive in critical times while retaining their current lifestyle and achieving their life objectives if the breadwinner dies. HLV is recommended for families with sole earning members.
A Human Life Value Calculator is a freely available online tool that helps in assessing the amount required to effectively compensate the income loss in the event of the demise of a sole earning family member. HLV Calculator allocates a value to human life which makes it simpler to buy insurance coverage. This calculator requires certain information from the user to give his/her value of life, which involves the current income, user’s age, and retirement age. The present age and the retirement age aid in determining the number of working years left for the policyholder. Moreover, the present income, along with current age and retirement age determines the future cash flows. No fixed formula of Human life value is valid in insurance as the information required for estimation differs across different calculators.
Apart from the income and age, the HLV calculator in insurance also needs the current expenses, liabilities, and assets. Some HLV Calculators might also need the information of any existing coverage. The main objective of the HLV calculator is to offer you an idea of the cover needed to protect the financial future of your loved ones.
Human Life value cannot be estimated exactly. The calculator solves this problem and assigns a number to human life valuer
It also helps in deciding the amount of coverage needed to ensure a financially protected future for your family.
With an exact idea of the insurance cover to secure your loved one’s future, you can purchase the right insurance policy.
As we have discussed, Human life value is calculated using an Human Life Value calculator that helps estimate the present value of your income by using the existing income and expenses. The expenses part such as insurance premium, personal expenses, and EMI are deducted from the present income. In order to determine the size of the needed corpus, the current value of the income to be replaced has to be computed. The current value is accustomed to inflation. The corpus is adjusted for the current liabilities. The final needed corpus is then adjusted for the current insurance cover and investments.
The following factors are taken into consideration while computing human life value:
Age
Gender
The target age of retirement
Occupation
Yearly Income
Monetary information on children and spouse
Employment benefits
The HLV Calculator is an easy tool with a simple-to-use interface. A basic HLV calculator in insurance has a few columns where the correct information has to be entered:
An HLV Calculator needs some basic information such as gender and the current age
You can easily choose between female and male and provide your present age
You have to provide the age at which you are planning to get retire and your existing income
After the estimated retirement age and the existing income, you have to enter the information of your liabilities and assets. In some cases, HLV calculators require the absolute value while in other cases they have a list of certain assets such as savings account, bonds, mutual funds, etc.
A list of liabilities is also there same as assets, which involves education loans, home loans, etc.
You are free to choose the liabilities and assets that are suitable to you and provide the value of both factors.
After providing the details, you are required to click on the calculate tab at the last of the page to get the HLV.
There are two primary methods to calculate HLV:
This method works on the concept that whatever income is utilized to support the loved ones has to be replaced by life insurance.
It works on the concept that the amount needed for the goals and requirements of the family in the event of the death of the breadwinner has to be covered by the policy.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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