How to Calculate Human Life Value(HLV)?

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How to Calculate Human Life Value(HLV)?

How to Calculate Human Life Value(HLV)?
  • 12th Sep 2022 |
  • 15,000

It is a known fact that while buying life insurance, you are looking at a certain amount as the coverage you require - an amount sufficient to fulfil your family’s needs after you. You often assume that the insurance agents will help you know about the entire process. However, it is always better to do some homework before you seek any kind of assistance.

How to calculate human life value?

There are numerous ways to know about the coverage your policy can provide. One of the most reliable and easy means to accomplish this is by calculating HLV.

Before you dive deeper into the topic, let us first understand what human life value and the human life stages in life insurance is.

What is Human Life Value?

To ensure that you have picked the correct sum assured, insurers use the HLV method of calculation. It is only fair if you have the question popping into your head about the full form of HLV. HLV full form is nothing but human life value, a number that represents the present value of future income, expenses, liabilities, and assets. It is typically used to determine how much money would be needed to protect the lives of your dependents with term insurance if you were to pass away. By knowing your human life value in insurance, you can quickly arrive at an ideal sum assured amount.

HLV in insurance refers to the monetary value attached to you today to get an idea of the value of the future expenses of your loved ones. This is calculated based on the current inflation rate. It is essential to secure your loved ones by meeting the expenditure of their needs after you, which is where the whole concept of the human life value comes in handy.


Calculating HLV in insurance becomes essential for those who are the family’s sole breadwinners. Simply put, human life value in insurance is assessed based on the family’s current expenditure. Therefore, what your loved ones will incur as expenses in the future determines the amount of your human life value.

How to calculate human life value?

HLV in insurance can be calculated using a human life value calculator available on various websites. The HLV calculator calculates the income replacement using the human life value formula.

Consider this example:

If your annual income is five lakhs, of which one lakh you spend on personal expenses. The surplus amount of four lakhs, your economic value, is the remaining amount for your family. Considering the tax payable, insurance premium, retirement age, number of working years, and expected rate of return, your human life value will be ₹3.9 lakhs.

While understanding how to calculate human life value, it is essential to remember that inflation would significantly impact the value as it will determine your expenditure. Therefore, the human life value calculator or the HLV calculator will also calculate the current inflation rate.

Steps To Calculate Human Life Value (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 current value of the required income stream by adjusting inflation.

Now that you know the HLV meaning and how to calculate it, you can determine the right amount of sum assured and provide all-around protection for your family. With online HLV calculators, now you can quickly assess your human life value from the comfort of your home.

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