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What is Human Life Value and How is it Calculated?

  12/5/23 3:55 AM

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Human Life Value (HLV)

is an approximate calculation of all the income you will earn over the course of your career. This calculation helps insurance companies decide what your ‘value’ is in terms of life insurance. Your insurance life cover or ‘death benefit’ is always calculated by first determining your HLV. To put it simply, your HLV is an estimation of the total income you will earn, from now until your retirement. And this value is then provided to your family as life cover in case of your untimely death to protect them from financial hardships.   

Importance of ‘Human Life Value’

The first thing to remember is that human life value does not really determine your actual net worth or value as a person. HLV is solely used by insurance companies to calculate the appropriate sum assured (money given out on your death) for your policy. The higher your HLV the more sum assured you will get for a policy.

HLV lets the insurer know if a person buying an insurance policy is worth the life cover they are asking for. For example, someone who earns Rs 2,00,000 per year is not eligible for a life cover of Rs 2 Crores, as the life cover is just too large for their overall income. However, someone who earns Rs 20 lakhs per year can try to purchase a policy with life cover of around Rs 2 Crores. In general, you should try to buy a policy that provides at least 10x the sum assured of your annual income.

The Relationship Between HLV and Financial Security

HLV is the total income an individual is expected to earn over the course of their life, and hence, it also calculates the potential economic loss a family would suffer in case of the person’s premature demise. For example, if you are the sole breadwinner of the family, your unfortunate demise will financially paralyze your loved ones. They will end up having to dip into their limited savings to meet their expenses.

However, if you have taken a life insurance policy with the right amount of cover (determined by your HLV), then you family will at least be financially stability when you are gone. It will help them maintain their current standard of living, pay outstanding loans, and provide funds to fulfil their long-term goals like higher education, marriage etc.

How is Human Life Value Calculated

The simplest way to calculate a person’s Human Life Value (HLV) is:

(Retirement Age – Current Age) X Annual Salary = HLV

This formula basically calculates your total potential income from the present up to your retirement. However, this basic formula does not give an accurate HLV for a person, as there are numerous other factors to take into consideration that are simply not mentioned here.

Other factors that can play a role in determining your HLV include:

  • Your life stage (married or not, with children or not, etc.)
  • Your regular expenses (housing, travel, medical, food, education, lifestyle, etc.)
  • Your pending loans or EMIs
  • Your savings and investments
  • If you have any existing life insurance

The human life value will keep changing depending on your life stage, inflation, etc. Insurance providers take all these factors into consideration during the underwriting process to determine the most accurate HLV possible.

Can a Person’s Human Life Value Change?

Yes, in fact, a person's human life value keeps changing as time goes on. This is the main downside of human life value, as HLV is only calculated based on your current financial situation. Nobody can predict the future, and your income could either drastically increase or decrease based on your life circumstances. So, it is rather difficult for an insurance provider to accurately predict what your HLV will be 10 years from now. This is why it is prudent to regularly calculate your human life value.  

What to Do if Your HLV Increases

Say you bought an insurance policy in your 20s, when you earned Rs 5 Lakhs P/A. But now you are in your 30s, and earn nearly Rs 25 Lakhs P/A. Your income has grown by five times over the course of a few years, but your insurance policy’s sum assured is still the same. So, what do you do now?

  • Try to Increase Sum Assured: The first course of action is to check if your insurance policy allows for increases in sum assured. Some policies have special clauses where you are allowed to raise your sum assured if you enter different life stages (marriage, childbirth etc). Moreover, some insurance policies simply increase the cost of your premium every year, which in turn also slightly increases the value of your sum assured.
  • Surrender or Buy New Policy: Not all insurance plans have flexibility options, but that does not mean that you cannot increase your sum assured. Keep in mind that you are not stuck with a policy till the term end. If a policy no longer meets your needs (especially the life cover), then it would be wise to just surrender that policy and get a new one that has the sum assured you want. You can also have multiple insurance policies at one time. In India, there is no official limit to the number of life insurance policies one can purchase.


Your HLV is one of the most important metrics to determine your life coverage. But remember that HLV is not the only factor that insurance providers consider while selling life insurance. Other factors that may affect your sum assured and premium include your health condition, age, lifestyle habits etc.

And don’t forget that your HLV is everchanging! If your income has increased or you have more liabilities, then make sure that you adjust your insurance requirements accordingly. To avoid a lot of hassles you can choose a term plan like Edelweiss Tokio Life- Zindagi Protect, which offers comprehensive life cover along with a whole host of other benefits, all for an affordable price!


Aastha Mestry - Portfolio Manager          

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.



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