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What is Human Life Value (HLV) & How to Calculate it?

Discover the concept of Human Life Value and learn how to calculate it effectively. Maximize your understanding by reading this blog.

  • 63,598 Views | Updated on: Jan 10, 2024

Determining the value of human life is a complex and thought-provoking task. Human Life Value (HLV) is a concept used by financial planners, insurance professionals, and individuals alike to assess the economic worth of an individual’s life. While it may seem difficult to assign a monetary value to something as intangible as a person’s life, calculating HLV can provide valuable insights for financial planning, risk management, and insurance needs.

Before you dive deeper into the topic of how to calculate human life value, let us first understand what human life values and the human life stages in life insurance are.

What is Human Life Value?

To ensure that you have picked the correct sum assured, insurers use the HLV method of calculation. The full form of HLV is 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.

How to calculate human live value (HLV)

Calculating HLV in insurance is 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.

Also Read: What is 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)

Determining the value of human life may seem like an abstract concept, but it holds significant importance when it comes to financial planning and risk management. Human Life Value (HLV) is a method used to assess the economic worth of an individual based on their potential income and the financial impact their absence would have on their dependents. Calculating HLV can help individuals and families make informed decisions regarding life insurance, retirement planning, and overall financial security.

Step 1: Evaluate Income and Potential Growth

The first step in calculating HLV is to assess the individual’s current income and future earning potential. Consider factors such as age, education, skills, and professional trajectory. It is important to project income growth over the individual’s working years, taking into account promotions, salary increments, and potential career changes. This evaluation provides a baseline for estimating the economic value the individual brings to their family or dependents.

Step 2: Determine Living Expenses

To accurately calculate HLV, it is crucial to identify the individual’s current and projected living expenses. This includes costs related to housing, utilities, transportation, healthcare, education, and other essential needs. Consider inflation and potential changes in lifestyle as the individual progresses in their career or reaches different life stages. Understanding the individual’s expenses helps in estimating the financial support required to sustain their dependents in their absence.

Step 3: Calculate Dependents’ Financial Needs

Next, determine the financial needs of the individual’s dependents in case of their premature death. Consider the number of dependents, their age, education expenses, healthcare costs, and any outstanding debts. Factor in both short-term and long-term financial requirements. For example, if there are young children, the calculation should include childcare costs, school fees, and college funds.

Step 4: Account for Debt and Liabilities

Consider the individual’s outstanding debts and financial liabilities when calculating HLV. This includes mortgages, personal loans, credit card debts, and any other obligations. These debts must be settled in the event of the individual’s death, and failure to account for them can burden the surviving dependents.

Step 5: Adjust for Inflation and Discount Rate

Inflation and the time value of money are crucial considerations when calculating HLV. Adjust all future income, expenses, and financial needs for inflation to ensure an accurate assessment. Additionally, apply a discount rate to account for the fact that future income and expenses are worth less in today’s terms. The discount rate reflects the potential return that could be earned on investments over time.

Step 6: Determine the Present Value

By applying the discount rate, the future cash flows associated with income, expenses, and financial needs can be converted into their present values. Summing up the present values of these cash flows provides an estimate of the individual’s HLV.

Final Thoughts

Calculating Human Life Value (HLV) is a complex process that involves assessing various factors to determine the economic worth of an individual’s life. While no formula can fully capture the intrinsic value of human life, HLV calculations can provide a useful framework for understanding the financial impact of an individual’s death or disability on their dependents and loved ones.

Key takeaways

  • Insurance HLV, or Human Life Value, involves assigning a monetary worth to oneself in order to estimate the potential future expenses of one’s loved ones.
  • The initial step in determining HLV is evaluating the person’s present income and capacity to earn in the future. This assessment takes into account various factors like age, education, skills, and professional trajectory.
  • To accurately calculate HLV, it is crucial to consider both the individual’s current living expenses and anticipated expenses in the future.
  • In the event of the individual’s untimely death, it is essential to identify the financial requirements of their dependents.



How much life insurance do you need?

Determining the appropriate amount of life insurance coverage depends on various factors specific to your personal circumstances. While there is no one-size-fits-all answer, I can provide you with some guidelines to help you make an informed decision.

  • Evaluate your financial obligations
  • Income replacement
  • Consider your dependents
  • Existing assets and savings
  • Future goals and aspiration
  • Professional advice


How important is it to plan for the well-being of your family in the case of any unfortunate event?

Planning for the well-being of your family in the case of any unfortunate event is of utmost importance. Life is unpredictable, and while we hope for the best, it is crucial to be prepared for the worst


How can the right amount of life insurance give you peace of mind?

The right amount of life insurance can provide you with significant peace of mind by offering financial security and protection for your loved ones in the event of your untimely death. Here are some ways in which life insurance can bring you peace of mind:

  • Financial protection for your loved ones
  • Replacing lost income
  • Covering outstanding debts and expenses
  • Business continuity
  • Peace of mind during life


Who invented Human Life Value?

The concept of Human Life Value (HLV) is not attributed to a single inventor but rather emerged as a framework within the field of actuarial science and insurance underwriting. HLV is a quantitative measure used to assess the economic value of an individual’s life based on factors such as age, gender, occupation, income, and other relevant variables. It is commonly employed in the insurance industry to determine the amount of life insurance coverage a person should obtain.


How can you assess your Human Life Value?

Assessing your Human Life Value (HLV) involves determining the financial worth of your life in terms of your future earnings potential and the financial responsibilities you have towards your loved ones. Although the concept of HLV is subjective and can vary based on individual circumstances, here are some key factors to consider when assessing your HLV:

  • Income and earning potential
  • Expenses and liabilities
  • Family and dependents
  • Inflation and investment returns
  • Insurance coverage
  • Health and lifestyle factors

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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