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Human-Life Approach


The Human-Life Approach is a method used in life insurance planning that calculates the financial value of a person’s life in terms of the loss that would be experienced should that person die unexpectedly. The calculation often includes factors such as an individual’s income, expenses, and the number of years until retirement. The aim is to ensure that survivors can maintain their current standard of living by compensating them for the lost income.


The phonetics of the keyword “Human-Life Approach” would be: /ˈhjuːmən laɪf əˈproʊtʃ/

Key Takeaways


  1. Income Replacement: The Human-Life Approach emphasizes on the financial loss that the dependents would incur if the income-earning individual passes away, where the primary objective is to replace the income that would be lost.
  2. Consideration of Various Factors: It takes into account various factors such as individual’s income, expenses, inflation, individual’s age, as well as the number of years till retirement, in order to calculate the coverage amount required.
  3. Focuses on Human Value: Unlike the needs-based approach, the Human-Life Approach focuses more on the economic value of the human life rather than just quantifying the financial needs of the surviving dependents.



The Human-Life Approach is an important methodology used in life insurance to calculate the appropriate coverage based on a person’s income potential. This approach is premised on the idea that the primary financial value of a human life is the present value of future income earnings and services that individual can provide to dependents or a business. In other words, it’s the overall economic contribution that a person could make over their commercially productive lifespan. Thus, this methodology aids in determining the financial loss that would be experienced should the individual die prematurely. By being able to accurately measure their financial impact, it ensures adequate insurance coverage is obtained which provides financial protection for dependents or businesses against such losses. Hence, the Human-Life Approach is critical in personal finance and business planning.


The purpose of the Human-Life Approach in finance and insurance sectors is to calculate the financial value of a human life, primarily to determine life insurance needs. It specifically assesses the individual’s financial contribution towards the family and household. This approach mainly focuses on the economic loss the family would suffer if the primary earning member were to unexpectedly pass away. In other words, it tries to quantify the income that would be lost, which helps determine the amount of life insurance one should purchase.Beyond income, the Human-Life Approach considers other factors, such as the value of benefits, raises, inflation, and the number of years until retirement. By considering these aspects, it helps in providing a more accurate representation of an individual’s economic worth over their remaining work-life expectancy. This approach is instrumental for financial planning as it safeguards the financial well-being of dependents, ensuring they maintain their living standards even in the face of such unforeseen circumstances.


The human-life approach is an insurance term primarily used to determine the amount of life insurance a family would need based on the financial loss they would incur if the insured person were to pass away. Here are three real-world examples:1. Family Scenario: Suppose there is a single-earning household where the father earns $100,000 per year. The family would have to replace this income if something were to happen to him. Using the human-life approach, the life insurance needed would be the present value of the loss in the family income for the remaining years until retirement. For example, if the father is 40 years old and plans to retire at 65, the family might determine they need enough life insurance to replace this income for the next 25 years.2. College Planning: Parents often buy life insurance to make sure their children can afford to attend college if they were to pass away. The human-life approach can help determine the amount of coverage needed. By estimating the future cost of college, including tuition and living expenses, they can calculate the amount of life insurance required for this specific need.3. Debt Protection: Imagine a situation where a couple takes out a mortgage or another large loan. The human-life approach can be a great tool to estimate how much life insurance they would need to cover the outstanding debt should one of them die prematurely. This approach will consider factors such as remaining loan balance, interest rate, and the remaining years to payoff. It helps ensure that the surviving spouse can maintain the current lifestyle without worrying about debt payments.

Frequently Asked Questions(FAQ)

What is the Human-Life Approach?

The Human-Life Approach is a method of calculating the estimated monetary loss resulting from the death of a wage earner. It takes into account factors such as income, expenses, inflation and life expectancy.

How is the Human-Life Approach used in finance and business?

In finance, this approach helps in determining the amount of life insurance a family would need to cover the potential financial loss in the event of a wage earner’s death.

What factors are considered in the Human-Life Approach calculation?

Factors include the wage earner’s age, income level, number of years until retirement, the rate of return on investments, inflation and estimated future expenses.

How is the Human-Life Approach different from the Needs Approach in life insurance calculations?

While the Needs Approach calculates insurance coverage based on the financial needs of dependents after the policyholder’s death, the Human-Life Approach is based on the income-earning capacity of the insured individual throughout their lifetime.

Is the Human-Life Approach only applicable to life insurance calculations?

While primarily used for life insurance policy calculations, this approach can also be used to assess compensation in case of a wrongful death lawsuit.

Can the Human-Life Approach be used with other life insurance calculation methods?

Yes, it can be used in conjunction with other methods to provide a comprehensive life insurance coverage plan.

How does inflation affect the Human-Life Approach calculation?

Inflation is taken into account since it can reduce the purchasing power of the insured’s future earnings. Higher inflation rate can lead to a higher amount of coverage.

Is Human-Life Approach adaptable to change in income and future financial obligations?

Yes, this approach is flexible and can be adjusted according to changes in income or future financial responsibilities.

Related Finance Terms

  • Life Expectancy Estimation
  • Future Earning Potential
  • Income Replacement
  • Life Insurance Coverage
  • Discounted Present Value

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