What is a 'Human-Life Approach'

A human-life approach is a method of calculating the amount of life insurance a family will need based on the financial loss the family would incur if the insured person were to pass away today. It is usually calculated by taking into account a number of factors including but not limited to the insured individual's age, gender, planned retirement age, occupation, annual wage, employment benefits, as well as the personal and financial information of the spouse and/or dependent children.

Since the value of a human life has economic value only in its relation to other lives such as a spouse or dependent children, this method is typically only used for families with working family members. The human-life approach contrasts the needs approach.

BREAKING DOWN 'Human-Life Approach'

Remember, when using the human-life approach, you'll want to replace all of the income that's lost when an employed spouse dies. To be more precise, you'll want to include only the after-tax pay, and make adjustments for expenses (like a second car) incurred while earning that income. Also, don't forget to add the value of health insurance or other employee benefits to the income number.

RELATED TERMS
  1. Actuarial Equity

    The calculation of an insurance premium based on crucial factors ...
  2. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  3. Needs Approach

    A method of calculating how much life insurance is required by ...
  4. Health Insurance

    A type of insurance coverage that pays for medical and surgical ...
  5. Composite Rate

    Composite rate is an insurance premium that is based on the average ...
  6. Total Insurable Value

    Total insurable value is the value of property, inventory, equipment, ...
Related Articles
  1. Insurance

    6 Steps to Determine Your Life Insurance Needs

    Use these basic calculations for an estimate of how much life insurance you should get.
  2. Insurance

    Getting Your (Insurance) House in Order

    From starting a family to retirement, insurance can play a role in taking care of financial needs. This piece looks at some of the choices you can make.
  3. Insurance

    Tips for Helping Clients with Life Insurance Needs

    Life insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
  4. Retirement

    Life Insurance After Retirement: Do You Need It?

    The answer depends on your sources of income, how much debt you carry and whether you have dependents who rely on you financially.
  5. Insurance

    Just How Much Life Insurance Do You Need?

    Figuring out how much life insurance to buy can be tricky, but not impossible.
  6. Insurance

    The Best Type Of Life Insurance For You Right Now

    Different stages of life call for different amounts of life insurance coverage. Find out what you need, when and why.
  7. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  8. Retirement

    The Smart Way to Use Life Insurance for Retirement

    Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
  9. Personal Finance

    How to Factor Family into Your Retirement Plan

    Hashing out a family retirement plan can be overwhelming. That's why it's important to revisit things like timing, saving for kids’ college, and caregiving for elderly parents each year.
RELATED FAQS
  1. How much life insurance should I have?

    The main purpose of life insurance is to provide the same standard of living for your family and cover your financial responsibilities ... Read Answer >>
Hot Definitions
  1. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
  2. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers ...
  3. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities ...
  4. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security ...
  5. Porter Diamond

    A model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to ...
  6. Oligopoly

    A market structure in which a small number of firms has the large majority of market share. An oligopoly is similar to a ...
Trading Center