Human Life Value (HLV) – Calculator

Human Life Value (HLV) – Calculator is an online calculator to easily find out the quantity of ‘Life Insurance Coverage’ required by a person. Before using the calculator let us find out what ‘Human Life Value‘ is all about.

What is Human Life Value (HLV)?

In General Insurance it is easier to quantify the value of the object or the event insured. There we calculate the value of loss or the amount required to replace the damage.

In Life Insurance, inestimable human life is insured. Value of human life is unlimited and it cannot be replaced at any cost. Then, how we can calculate the insurance coverage required for human life?

There are different methods to calculate human life value.

Human life value HLV - Income replacement Method and Need based method
  • Income replacement Method: Human Life Value (HLV) concept developed by Dr. S. S. Huebner follows the Income-replacement theory. Whatever income is used to support the family has to be replaced through Life Insurance.
  • Need-Based method: Amount required to cover the needs and goals in the event of demice of the earning member is calculated here.

Why Human Life Value Calculator is important?

Many a times, while considering on a new insurance policy, some questions would pop up over your mind.

  • Do I require another Insurance policy?
  • Am I adequately insured?
  • How much more Insurance I may require? etc.

In order to answer these queries properly, we should calculate the HLV and then compare it with the existing insurance.

How ‘Human Life Value (HLV)’ is calculated (income replacement method)?

In order to understand the HLV concept at depth, let us break the calculation process into simpler steps.

Step 1 – Calculate Net Income.

As we have seen, the amount of insurance coverage required is being calculated based on the income of the person. To be more precise, net income or the amount going to the family has to be considered.

Net Income is the total income minus personal expenses. And the net income varies based on many parameters such as age, income, personal expenses, retirement age, etc. In other words, calculate the net amount of income used to support his family in his earning period.

Step 2 – calculate the ‘Present Value’ of net income

The current value of the total net income is derived based on the bank interest rates prevailing. This is calculated at interest rate compounding yearly.

Step 3 – Adjust for the inflation rate.

People often overlooks the fact that inflation eats away the value of money. Higher the inflation rate you will have to set aside more amount to meet the requirements.

Read More: How much Insurance do I need ?

Human Life value – Need-based Approach

The need-based approach is another popular method adopted to calculate HLV. The amount required to cover the needs and goals of the Life Insured in the event of the demise of the earning member is calculated.

This approach offers a comprehensive calculation method as all the goals including the goals of the dependants and existing investments and liabilities can be accounted for.

How ‘Human Life Value (HLV)’ is calculated (Need-based method)?

Let us break the calculation process into simpler steps to understand this method better.

Step 1 – Calculate current value of the income

Current value of income is calculated by reducing the expense portions (including Personal expenses,EMI Payments , Insurance premium etc.) from the annual income.

Step 2 – Calculate the applicable interest rate

The adjusted investment interest rate is calculated to take into account the inflation rate also. The formula to be used is “((1+investment rate)/(1+inflation rate))-1”

Step 3 – Calculate the present value

To find the Corpus amount, present value of the series of income (values adjusted by taking applicable interest) to be replaced is calculated. Present value is already adjusted for the inflation and applicable investment rates.

Step 4 – Adjustment for liabilities and existing investments

The corpus value is adjusted for liabilities by adding it to the required insurance coverage. The final required insurance coverage is obtained by reducing the existing investment provisions and existing insurance.


Either the Income Replacement Method or the Need-Based Method can be used to find out the required insurance coverage. The calculators provided in this post will help you to understand these methods easily. If you have any doubts or require any clarifications, use the comment section at the bottom of this post. Please feel free to share this post so that more people get benefited.

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