HUMAN LIFE VALUE
Should You Buy Life Insurance? And, If So, How Much Life Insurance Should You Buy?
(The Story Of Your Human Life Value)
If I asked you how much you should insure your car or home for, you’d probably look at me like I had alligators crawling out my ears.
The answer is obvious: You insure those things for their full replacement value.
Well, the same idea applies when buying life insurance.
Enter, Human Life Value (HLV).
Let’s start with the basics, shall we?
Human Life Value is an objective measure of the economic value of your life. It rests on the somewhat obvious and basic premise that you value your own life.
Implicit in this assumption is that in order to survive, you must produce an income… and that income is valuable to both you and those you care about… and if your life or ability to produce an income is lost, that it can be replaced.
In other words, your life (and your ability to produce an income) is a value. Human Life Value tells you how much your productive ability (i.e. earning potential) is worth. Life insurance replaces it once it is lost.
But… in order for this to make any sense, you must place a high value on your own life and your ability to produce income for as long as you live.
If you do not value your life and income potential, then it logically isn’t worth insuring. If you value it, but don’t place a high value on it, then it might only be worth insuring for a small sum of money. If you value everything you can potentially make over your lifetime, then it is worth insuring your life for its full economic value.
The HLV equation is purely mathematical, but the concept of Human Life Value is driven by your own unique story… your personal values, your chosen profession and career, and your commitment to increasing personal responsibility and improving your earning potential throughout your life.
Sounds serious, doesn’t it? Well, it is but… it’s also a remarkable story of your life and what that life is worth to you and those you care about.
So, before we get to the math, let’s get a better understanding of Human Life Value and then… let’s talk about you.
Ready? Then, let’s go…
What Is Human Life Value (HLV) And Why Does It Matter?
The undisputed heavyweight champion of life insurance education, Solomon Huebner.
He wrote the very first life insurance textbook in 1915, which later became the standard text for Chartered Life Underwriter students.
He also wrote the very first textbooks on the stock market, stock exchange, bonds, the bond market, organized commodity markets, and property insurance.
Huebner founded the American College in 1927 and the American Institute for Chartered Property Casualty Underwriters in 1942.
He was the emeritus professor of insurance at the University of Pennsylvania for 49 years and… taught an estimated 75,000 students the value of life insurance and the financial markets.
All modern texts and educational material on life insurance (and many other financial topics), including the economic value of human life, can be traced directly back to Huebner.
How Much Insurance Should You Buy? It Depends On Your Human Life Value (HLV)
Solomon Huebner, Ph.D., was widely recognized as the “father of insurance education”… inventing and defining the term “human life value,” which he defined (in his book The Economics Of Life Insurance) as:
…the monetary worth of the economic forces that are incorporated within our being, namely, our character and health, our training and experience, our personality and industry, our judgment and power of initiative, and our driving force to put across in tangible form the economic images of the mind.
In other words, you have a certain amount of earning potential. Maybe that earning potential is $50,000 per year or maybe it’s $100,000 per year or maybe it’s much, much more.
How are you even capable of earning this kind of money?
Human beings (which, presumably, includes you) are incredibly creative. And… we have this really cool ability to take what’s inside our mind and bring it into the real world through a combination of rational thought, initiative and action, and good judgment.
And then… we sell the things we make or help make (either in our own business or while working for someone else) for a profit, make money, and pursue more and more values to make more and more money.
This is true, even if you currently live on “property income” or “investment income.” This is income which is vulnerable to loss if the underlying asset (i.e. the business) craters or even goes through a tumultuous period and loses value (thus decreasing the amount of income you receive or decreasing the total value of the bonds you hold or your ownership in the business).
Regardless of your source of income, your earning potential is likely worth many millions of dollars over your entire lifetime. And… you can do all kinds of good and wonderful things with that money while you’re alive.
That’s the good news — you’re already primed to be a multi-millionaire with amazing potential and… you don’t even fully realize it yet.
The bad news is… your life is not guaranteed.
That may not be headline news, but it’s something a lot of people overlook, ignore, or minimize. You may die at any moment from just about any and every cause imaginable. Fortunately, your risk of dying young is really, really small… almost non-existent, really.
But… as you get older, your risk of dying increases until… it becomes an inescapable certainty and… you die. What happens between now and then is up to you. You can continually work to increase your earning potential and insure that potential or… you can let it go to waste.
If you die before you’ve realized your full earning potential then… your future earnings are lost forever. Your potential is lost forever.
Why Does Any Of This Matter?
It might not matter. It depends entirely on you and your own personal values.
Do you value your future income and earnings potential? Do you want to make this world a better place to live for you and those you care about while you’re alive? What about after you’re dead? If you don’t care about any of that, don’t buy life insurance. Alternatively, if you don’t place a high value on your future income potential, then simply buy less than your full human life value.
If you do care about those things, and you want to be fully insured, then insure your life for its full economic value and figure out what kind of legacy you want to leave.
If you want to learn more about alternative approaches to calculating life insurance needs, and the issue of Human Life Value vs Needs Analysis, download the article, Human Life Value vs Needs Analysis.
xCalcHLV: An Interactive Human Life Value Calculator
How To Use This Calculator
This Human Life Value calculator will help you determine your total lifetime earning potential and also how much life insurance you should buy based on that potential. Select any green input field, highlight (or delete) the default numbers, and enter your own information.
When you’re finished with one input field, either tab to move to the next field or select the next field with your mouse. Do not press “Return” or “Enter” as this will not select a new input field. Press “Reset” at the bottom to reset all input fields.
Watch the video on the left for more information.
Want To Learn More?
If you’re ready to learn more about life insurance and how it can improve your financial plan, then click the link below and explore more sections of this guide.