Human-Life Approach

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. Annual Renewable Term (ART) Insurance

    A form of term life insurance that offers a guarantee of future ...
  4. Needs Approach

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

    A protection against the loss of income that would result if ...
  6. Voluntary Life Insurance

    A financial protection plan that provides a beneficiary with ...
Related Articles
  1. Financial Advisors

    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.
  2. Home & Auto

    Intro To Insurance: Conclusion

    By Cathy ParetoInsurance is an integral part of any personal financial plan. The type of insurance and the amount of coverage you obtain all depends on your unique financial and family circumstances, ...
  3. Budgeting

    The Complete Guide To Retirement Planning For 40-Somethings: Life Insurance

    If you have dependents who rely on your income, consider whether you need to purchase life insurance. Proceeds from your life insurance can be used for purposes such as: Providing replacement ...
  4. Insurance

    When Life Insurance Isn't Worth It

    So, you're thinking about buying life insurance, but do you really need it?
  5. Insurance

    Is Your Employer-Provided Life Insurance Coverage Enough?

    Learn about the several potential problems involved with obtaining life insurance through your employer.
  6. Insurance

    5 Signs You Need Life Insurance

    If you can only afford to invest or buy life insurance, experts say you should buy the insurance.
  7. Insurance

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  8. Investing

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  9. Life Insurance

    What life insurance is: A contract with an insurance company that provides your beneficiaries with a certain amount of money when you die. Pros: Beneficiaries are safeguarded from the financial ...
  10. Insurance

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
RELATED FAQS
  1. How much life insurance is enough?

    There are many factors to consider when calculating life insurance. Some of those factors include marital status, dependents, ... Read Answer >>
  2. How old should you be to get life insurance?

    There's really no pre-determined age when it suddenly becomes necessary to take out a life insurance policy. However, if ... Read Answer >>
  3. Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ... Read Answer >>
  4. How do Social Security survivor benefits work?

    Understand the basics of survivor's Social Security benefits, when you can apply, and how your age and relationship to the ... Read Answer >>
  5. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  6. Can my spouse and children collect my Social Security when I die?

    Under survivor benefits, Social Security provides income for the families of workers who die. If you die, certain family ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center