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. Needs Approach

    A method of calculating how much life insurance is required by ...
  3. Life Insurance

    A protection against the loss of income that would result if ...
  4. Second-To-Die Insurance

    A type of life insurance on two people (usually married) that ...
  5. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  6. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
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

    Life Insurance Should Cover Emotional Needs Too

    Life insurance should cover the financial and emotional needs of family members.
  3. 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.
  4. Personal Finance

    Military Families and Life Insurance: What to Know

    Here's an overview of what life insurance should address, with five considerations that should help determine how much coverage you should have.
  5. 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.
  6. 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.
  7. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  8. Insurance

    Just How Much Life Insurance Do You Need?

    Figuring out how much life insurance to buy can be tricky, but not impossible.
  9. 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.
  10. 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.
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. Financial Statements

    Records that outline the financial activities of a business, an individual or any other entity. Financial statements are ...
  2. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  3. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  4. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  5. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  6. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
Trading Center