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. Whole Life Insurance Policy

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

    Property and casualty insurance products for individuals that ...
  4. Health Insurance

    A type of insurance coverage that pays for medical and surgical ...
  5. Total Insurable Value

    Total insurable value is the value of property, inventory, equipment, ...
  6. Immediate Family

    A person's smallest family unit, consisting of the closest relatives, ...
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. 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.
  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. 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.
  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. Financial Advisor

    How Life Insurance Can Help With Liquidity

    Life insurance can provide liquidity in personal and business situations when access to capital is essential. Learn how to utilize its unique properties.
  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.
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 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 >>
  3. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... 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 >>
Hot Definitions
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  2. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  3. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  4. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  6. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
Trading Center