Do You Know Your Value ?

The concept of Human Life Value (HLV) is something that we all hear about (especially from the insurance agent!) but do not really know how to calculate. The reason being there is no definitive source of information on the subject.

The fact that there is more than one methodology to calculate the HLV makes the subject even more challenging to understand.

The most common definition of HLV is the expected life time earnings of an individual, i.e. what is the total income that the individual is expected to earn over the remainder of his working life, expressed in present Rupee terms.

For the uninitiated, inflation eats away the value of money; a Rupee today is worth more than a Rupee tomorrow and therefore one needs to suitably ‘discount’ future earnings to express the value in present Rupee terms.

Our view on how HLV should be calculated is quite different from this. HLV in our view is the monetary value of all the yet-to-be fulfilled needs of the dependents plus all the outstanding liabilities.

Why do we define HLV in this manner (notice that we do not factor in earnings at all)?

Simply because even though expected incomes may not be sufficient to meet the needs, the needs are still there. And an individual strives to meet the needs of his/her dependents. So, the HLV thrown up by our definition is really a ‘target’ that you should have in mind; you can and possibly may have to plan for a lower HLV, but don’t despair over that.

The important thing is to set a goal for yourself so that your dependents are well taken care of, whether you are there for them or not.

Here’s an example to understand this better. Let’s calculate the HLV of Vishal, who is married and has a child. In the table all the information about Vishal, his family and their needs is provided. A couple of points from the table need to be explained in more detail.


Vishal’s age Years 30
Age of spouse Years 27
Life expectancy of spouse Years 70
Age of child Years 3
Child’s share of monthly household expenditure % 10
Child will remain dependent till Years 22
Monthly household expenditure Rs 40,000
Of the above, how much is spent on Vivek Rs 10,000
Expected inflation in household expenditure % 5
Money to be set aside for child’s education (in present value terms) Rs 1,000,000
Money to be set aside for child’s marriage/other needs (in present value terms) Rs 750,000
Outstanding loans Rs 1,500,000
Other liabilities Rs 500,000
Medical expenditure/emergency fund Rs 500,000
Rate of return on low risk securities/deposits % 8
Human Life Value Rs 16,645,475
If the rate of return on low risk securities/deposits is % 7
Revised Human Life Value Rs 18,183,996

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