What Is Human Life Value And How To Calculate It

What is Human Life Value and How to Calculate It?

Human Life Value (HLV) is an idea used by insurance agents to determine the economic worth of a human life.

Written by : Knowledge Centre Team

2025-12-24

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10 minutes read

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Your life is priceless, and it cannot be valued. Life is subject to risks of disability and death due to accidental and natural causes. If any worst-case scenario happens to you, the household will suffer a loss of income. The financial damage to the family is even greater if you are the only breadwinner.

You may not want your loved ones to suffer emotionally and financially in any situation. Hence, you must know your life's value and plan your investment accordingly. If you don't plan well, and in case of your death, you leave behind a generation whose financial condition goes down drastically.

When you earn, save, and invest in the right way, you achieve your financial goals and secure the future of the upcoming generation.

Key Takeaways

  • Use the human life value formula to estimate your family's financial needs, ensuring adequate insurance coverage.

  • The human life value calculator helps plan your insurance, estate, and financial goals efficiently.

  • Regularly calculating your human life value helps adjust coverage as your income, liabilities, or family needs change.

  • Including debts, expenses, and future goals ensures accurate human life value calculations for better planning.

  • Using examples makes understanding the human life value formula easier for effective financial decisions.

What is Human Life Value (HLV)?

Human Life Value (HLV) is the present value of all future income you would expect to earn for your loved ones. It is the sum of the total income you are expected to earn before retirement.

It also indicates the economic loss a family would suffer in case of the unfortunate event of your early death. The human life value formula helps you determine the coverage amount for your life insurance needs based on your income, liabilities, expenses, and savings.

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Importance of Human Life Value Calculator

A Human Life Value (HLV) calculator is a powerful tool for assessing your financial worth based on income, expenses, and future obligations. It simplifies financial planning, ensuring you secure adequate insurance coverage and make informed decisions for your loved ones.

Let us see why it is important:

  • Financial Planning: The concept of human life value plays a crucial role in financial planning. By calculating your HLV, you gain clarity on your income potential, liabilities, and dependents' future financial needs. Using the human life value formula, you can determine the amount required to safeguard your family’s lifestyle, debt repayments, and major life goals like education or retirement.

  • Insurance Coverage Selection: The human life value formula makes choosing the right insurance coverage easier. The HLV calculator helps you estimate the ideal life cover amount by evaluating your current income, future expenses, and potential inflation. This ensures your family is financially stable in your absence, protecting them from unforeseen challenges.

  • Estate and Business Planning: The human life value approach is invaluable in estate and succession planning for business owners and individuals with multiple assets. By calculating your HLV, you can allocate funds to settle liabilities, divide assets fairly, and ensure your family or business partners are financially secure.

What are the Different Methods Used to Calculate Human Life Value? 

There are different ways to calculate human life value (HLV). Calculating your HLV requires determining your life's financial worth in terms of your potential earnings and potential expenses. Although the concept of HLV is subjective, companies use solid methods to determine an individual's HLV. The two popular methods are need-based and income-replacement methods.

  1. Income Replacement Method: In this method, your life value is calculated based on your annual income. The HLV is determined as:

    Your Annual Income * Years Left for Retirement

    For example, if your income is ₹10 lakh per year and you are currently 35 years and plan to retire at 50, your HLV is at least 10,00,000 * 15 = ₹1.5 crore.

  2. Need-Based Method: The calculation is done based on day-to-day expenses till the life expectancy of the youngest member of the family. The factors considered for assessment are the number of dependents and their needs, loans, children's education and marriage, your lifestyle, etc. Once you sum up everything, the value that comes up is your Human Life Value.

    You can calculate HLV using the online calculators available. However, you should know that the value keeps changing. The number changes with your life stage, family condition, and annual income. If you calculate the human life value at 25 when you are single, the value will differ when you calculate it at 35 when you are married and when you have children. Hence, revisit the calculation regularly and do not see it as a one-time activity.

    Determining the Human Life Value could seem very vague, but it is very important in risk management and financial planning. Calculating Human Life Value in insurance can help people make well-informed decisions regarding planning for their future.

Step-By-Step Process on How to Calculate HLV
 

  1. Evaluate Income: The very first step in figuring out your HLV is to evaluate your current income and future potential earnings. Take into account factors such as age, skills, education, and potential career trajectory. It is vital to estimate your future income growth over your potential working years and take into consideration the various potential promotions, salary, and job changes. This assessment works as a baseline for estimating your economic value to your family or dependents.

  2. Determine Expenses: Calculating HLV requires you to have a grasp of your current and future expenses. These expenses include costs related to all your essential needs, like housing, transportation, food, and more. It is also important to consider inflation and potential changes in lifestyle as you progress through your life and career. Understanding your current and potential expenses gives an insight into the financial support required to provide your family in your absence.

  3. Calculate Financial Needs: The next step is to figure out the financial needs of your dependents in case of your premature death. Consider the number of people dependent on you, their age, education costs, healthcare, and any debts. Take into account both short and long-term financial requirements. For example, if you have children who just graduated from school, their college costs and any other expenses will be taken into account. The same would be the case for any retired parents, where their medical and living costs would be taken into account.

  4. Count Liabilities: You must consider your debts and liabilities when calculating your Human Life Value. These liabilities include personal loans, mortgages, credit card debts, and other such liabilities. These expenses must be settled in the event of an individual’s death. If they aren’t accounted for and dealt with, these expenses could impact the financial conditions of your surviving family even more than they would otherwise.

  5. Calculate Inflation and Discount Rate: Inflation is a very important metric to account for when calculating your HLV. Adjust all future income and expenses for inflation to have an accurate judgment of your HLV. You will also have to account for discount rates and apply them to those future earnings. Do this because future income and expenses are worth less in comparison to today’s expenses. This discount rate takes into account the potential return that could be gained from investments over time.

  6. Evaluate Your Final Value: Apply the discount rate to all future earnings and expenses. This will then reflect the value of those future earnings and expenses in terms of the present value. Adding up these present values will provide you with a fairly accurate estimate of your HLV.
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Did You Know?

The man widely known as the inventor of the Human Life Value in insurance, Dr. Solomon S. Huebner, is considered to be the “father of insurance education.” 


Source: Wikipedia

Young Term Plan - 1.5 Crore

Example Calculation of Human Life Value

A human life value calculator makes the process easier by giving concrete values for your insurance planning. However, knowing the exact formula is still important to understand how the numbers are exactly derived.

Here's how to calculate HLV:

Step 1: Identify Annual Income: Suppose your annual income is ₹10 lakh.

Step 2: Estimate Annual Expenses: Your annual expenses, including household costs, loans, and lifestyle expenses, amount to ₹4 lakh.

Step 3: Calculate Net Income Contribution:  Net Income Contribution = Annual Income - Annual Expenses (₹10 lakh - ₹4 lakh = ₹6 lakh)

Step 4: Determine Working Years: Assuming you are 35 and plan to retire at 60, your remaining working years are 25.

Step 5: Apply the Human Life Value Formula: Human Life Value = Net Income Contribution × Number of Working Years (₹6 lakh × 25 = ₹1.5 crore)

This calculation suggests you would need ₹1.5 crore in life insurance coverage to ensure your family maintains their current lifestyle and financial stability if anything happens to you.

Why Do You Need to Calculate Human Life Value (HLV)?

If someone asks you about your life values, you may not be able to answer. Also, if you want to do financial planning, it is essential to know the value of your life. Below are some of the reasons you need HLV:

  • Human Life Value is not easy to calculate. The methods discussed above help you solve the problem and give a value to human life.

  • It helps decide the coverage amount you need to financially protect your family's future.

  • If you have taken a loan or plan to take one, the HLV changes. It helps you in loan management. How much loan should you take, when you should clear the debt, etc.

Life insurance plans can help you fulfil important financial needs. Your HLV is the maximum limit of your life cover needed. Meaning all the life insurance plans combined should have the life cover equal to your HLV.

Conclusion

Calculating Human Life Value is a complicated process that takes various factors into account to determine an economic value. While no formula or calculation can accurately value somebody’s life, HLV calculations create a useful structure to understand the financial impact of someone’s death on their loved ones.

Glossary:

  1. Discount Rate: An estimated amount that an insurer provides to someone with critical illnesses to support income loss.
  2. Loan Management: This is the act of managing one’s loans, whether they be personal or business-based.
  3. Inflation Adjustment: Accounting for rising costs over time to ensure future income and expenses reflect real purchasing power
  4. Present Value: The current worth of future income or expenses after adjusting for inflation and expected investment returns
  5. Income Replacement Methods: Also known as a term plan, this is designed to provide financial safety to your loved ones in case you pass away.
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Uncertain About Insurance

FAQs

Dr. Solomon S. Huebner developed the human life value formula in 1924 at the Wharton School of Finance and Commerce.

You can assess your Human Life Value by considering factors like your age, income, future financial needs, and liabilities. There are two main methods to calculate your HLV: the income replacement method and the need-based method.

For example, if your income is ₹5 Lakhs per year and you are currently 25 years old and plan to retire at 50, your HLV is at least 5,00,000 * 25 = ₹1.25 crore.

While there may not be a single perfect number for everyone, life insurance coverage should ideally compensate for the insured individual's contributions. Many people use a simple starting point of a few times their annual income, but every family’s needs are unique. The most comforting approach is to work with a trusted insurance provider who can help you choose a cover that truly protects your loved ones.

The HLV full form is Human Life Value. In insurance terms, HLV meaning refers to the economic value of an individual’s future income, which helps determine how much life cover a person may need.

The human life value formula estimates the present value of your future earnings, after accounting for expenses and liabilities. A commonly used human life value calculation formula is:


HLV = Your Annual Income * Years Left for Retirement

An HLV calculator simplifies the HLV calculation by automatically factoring in income, expenses, age, liabilities, and goals. Instead of doing a manual HLV calculation, the calculator gives a quick, realistic estimate of human life value in insurance, helping you choose adequate life cover without under- or over-insuring.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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