HLV Calculator
Human Life Value (HLV) of an earning member in the family could be defined as the amount that the family would require to retain the same standard of living in the absence of the earning member. This would be the maximum amount for which a person can seek insurance protection. The amount of insurance you require can be calculated in a few different ways -but a comprehensive method of calculating this is:
How to calculate HLV
The first step towards calculation of HLV would be to determine the net annual income of the person after deducting the amount spent by him for his personal use. This amount will be the amount that he affords to his family annually. For Example: Mr. Sinha, aged 40 years, earns 15,00,000 per annum and spends 4,50,000 per annum on himself. Hence, he earns a net income of 10,50,000 p.a. for his family. Therefore, as income replacement, his family would require 10,50,000 p.a. for 1 year of life expenses. Each year, with inflation, the family's expenses would proportionately increase, which must also be taken into account.
The calculation will also include specific goal related expenditure. For example, suppose Mr. Sinha has a son and a daughter both of whom would require 10 lakhs for their educations i.e. a total of 20 lakhs. In Mr. Sinha's absence, this amount is still required such that the children's educations do not suffer. Hence this goal amount can be added to the financial value of Mr. Sinha's life.
Once the HLV has been calculated, the next step is to choose the appropriate insurance product to cover your needs. There are a number of insurance products available in the market today – from term plans to ULIPs to endowment plans and so on. It is important to assess the available products and select the right insurance for your needs.
The calculation will also include specific goal related expenditure. For example, suppose Mr. Sinha has a son and a daughter both of whom would require 10 lakhs for their educations i.e. a total of 20 lakhs. In Mr. Sinha's absence, this amount is still required such that the children's educations do not suffer. Hence this goal amount can be added to the financial value of Mr. Sinha's life.
Once the HLV has been calculated, the next step is to choose the appropriate insurance product to cover your needs. There are a number of insurance products available in the market today – from term plans to ULIPs to endowment plans and so on. It is important to assess the available products and select the right insurance for your needs.
