What Human Life Value means
Human Life Value is an estimate of the economic value of your future earnings to the people who depend on them. It answers a specific question: if the income stopped today, how large a sum would be needed to replace it for as long as the family relies on it?
The calculation takes your income, removes the portion you spend on yourself, and works out the lump sum that could generate that inflation-adjusted amount for the remaining years. Outstanding loans are added, and existing cover and investments subtracted.
Why cover is so often inadequate
Most people hold life cover sized to a premium they were comfortable paying, or to a round number that sounded large. Very few hold cover sized to what a dependant would actually need for twenty-five years.
Pure term insurance is what makes an adequate figure affordable. Bundled savings-and-insurance products deliver a fraction of the cover for the same outlay.
Reviewing it
The right figure changes with income, family size and liabilities. It is worth recalculating after a marriage, a birth, a promotion or a new loan — and reviewing the nomination on every policy at the same time.