Insurance and Human Life Value

The insurance companies take into account the current earnings of the person while allocating the policy. This earnings is multiplied by the tenure of the policy to arrive at the estimated sum assured plan for the insurance policy. There is no standard guidelines to calculate the best possible sum assured for any policy and it may vary slightly from one insurance company to another. In this regard, you should understand the importance of HLV in Insurance. Your entire financial value is based on this factor and it determines the amount of insurance you need to buy to get the proper protection for your future. You can see the complete details mentioned in the insurance documents and HLV full form in Insurance policy is clearly mentioned in the policy document.

How do insurance companies evaluate sum assured for any policy?

To begin with, you need to understand HLV full form in Insurance and the method involved in calculating this figure. To begin with, the present age of the person is considered along with the current earnings to assess the human life value of the person. The current annual earnings is multiplied with the tenure of the policy that is usually considered till the standard retirement age of the person. This amount is further discounted after calculating inflation and other expenses involved in future. After everything is done, the HLV in Insurance is calculated and the best possible sum assured figure is arrived in this manner.

How HLV changes with time?

Remember that HLV in Insurance is not constant throughout your life and different factors like changing economic situation along with inflation and interest rates in the market can affect the final figure. In this regard, you should not be disappointed when the HLV is calculated at a low rate in the early stages of your life. As your income increases in future, the value also increases and you may be able to achieve the desired target in terms of human life value. For this reason, it is important to understand HLV full form in Insurance documents to avoid any confusion about this topic.

How inflation affects the entire calculation?

Inflation is a crucial factor that can significantly affect the savings of any individual. This is the rate at which money depreciates and your insurance policy also gets affected with this figure. When the overall inflation is high, the HLV gets reduced significantly as the earnings will be eaten up by the inflated economy. You have to also consider future responsibilities of your family as inflation can increase your expenses by a huge margin. This figure indirectly affects the rate of interest and your earnings from the insurance policy will also get reduced with higher inflation rate in the market.

How much insurance do you need?

This is one question you need to carefully answer as it can have a major impact on the life of your family members in your absence. You will be surprised to know that many people do not even have a sum assured that is equal to their annual income. This essentially means that their family can continue to survive in the same standard of living for one year in their absence. This is a ridiculous figure and you should never underestimate the risk involved in your life and always stay protected with proper Life Insurance policy. The simple thing you need to understand is that HLV in Insurance indicates your complete earnings that is expected during your lifetime. In typical terms, you need to be insured for your entire human life value. However, if this is not possible due to financial commitments and other problems, you should at least make it a point to be covered for half of your human life value. You can check the HLV full form in Insurance policy portals and even calculate the amount based on your current earnings.

How to calculate HLV effectively?

The simplest way to calculate HLV in Insurance is to visit popular online portals that provide this information. You can use the simple human life value calculator tool provided by these companies and calculate the figure. All you need to do is to mention your present age along with your current annual income. Apart from that, you can mention the expected retirement age and the expected rate of interest in future. It is a good idea to consider a figure that is lesser than the present interest rate so that you can arrive at the best possible figure for the human life value. The tool can calculate the HLV based on these factors and this gives you a fair idea about your overall lifetime earnings.

By providing suitable insurance cover for an amount that is close to your human life value, you can rest assured that your family can continue to manage the financial commitments in future even during your absence.

This is Yash sharma Sr. creative writer. I have written several articles on finance, insurance & loans & I like very much to write insurance articles.