Human-Life Approach

AAA

DEFINITION of 'Human-Life Approach'

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.

INVESTOPEDIA EXPLAINS '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. Life Insurance

    A protection against the loss of income that would result if ...
  2. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  3. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  4. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  5. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  6. Needs Approach

    A method of calculating how much life insurance is required by ...
Related Articles
  1. Taking The Surprise Out Of Long-Term ...
    Home & Auto

    Taking The Surprise Out Of Long-Term ...

  2. Long-Term Care Insurance: Who Needs ...
    Home & Auto

    Long-Term Care Insurance: Who Needs ...

  3. Life Insurance: Putting A Price On Peace ...
    Insurance

    Life Insurance: Putting A Price On Peace ...

  4. What is the difference between term ...
    Home & Auto

    What is the difference between term ...

comments powered by Disqus
Hot Definitions
  1. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
Trading Center