When it comes to insurance, human life has several values: your expected lifespan, the value of income you will earn over a lifetime, and the emotional value of family. How can all this be calculated to encompass the value of one person? A human life? Invariably, insurers will reduce everything to numbers, and everything you value, including life itself, will add up to a financial value.
In the world of life insurance calculations, Human Life Value (HLV) is the present value of all future income that you could expect to earn for your family. This key number is used to determine your life insurance needs on the basis of your income, age, expenses, savings and liabilities.
Some people might say you can’t put a value on a human life, but insurance companies would beg to differ. To design products, policies and evaluate life expectancy, there has to be a starting point – and that is a figure ascribed to a person with regard to their career, marriage and parental status.
Life insurance is essentially about calamity. It’s there in case things go wrong: death, debt, housing, unexpected expenses, illness. But depending on the type of life insurance you choose, there is also a cash accumulation value that acts as a supplementary savings feature and works on a tax-deferred basis much as an RA. With a life insurance policy, there are few rules that limit the size of premium payments, so an individual may choose to pay a higher premium to receive a higher cash value.
At this point, if we’re of a philosophic nature, we may begin to wonder if the value of our lives may simply lie in the amount of money we are prepared to pay into a policy. After all this is how our family will benefit should we suffer an untimely death – and that is an amount arrived at by choice and calculation and affordability. What is key is probably not the value of the insurance and the cash value, but how you arrive at the evaluation of your personal world.
The impact of loss
Insurance will hover around the Human Life Value Definition, but perhaps you should consider the impact of losing someone, particularly if that person is the main breadwinner. Factors to consider would be the loss of earnings, the age of children, and the value insured.
So first fund your HLV. Then factor in wealth-building strategies that will provide a foundation to support independence and aspirations. Structure the policy to grow the cash value and death benefits over time, so that you reflect the growth and true value of your life and world experience.
The value of life really depends on how you see it, how you use it, and how you envision a valuable legacy for your family, or whoever may be beneficiaries of your chosen insurance. So there are a couple of rules to keep in mind if you really want the value of your human life to impact and count.
- Invest with knowledge and wisdom and don’t be too quick to follow the vagaries of the stock market. Think first and play the game with canny insight.
- Add wealth-building assets to your portfolio – insurance being only one aspect. Add business, venture capital, property and stocks and shares – leverage your value by increasing your income potential in whatever way you can.
- Use your money, talents and creativity to truly enhance the value of your life. The more you build financial worth around the value of your life, the more control and choice you will have with regard to how you fund your life insurance.
- Time is a valuable part of our lives. Cash accumulation, financial leverage and death benefits are all meaningful within a lifetime. Purpose and planning are part of every life structure – and necessary to ensure significance personally, financially and with regard to family security. Legacy will reflect the way you have lived, and what you have done with insight and forethought, rather than the simple experience of life itself.
Check your policies, check your life
VeriFi is an online tool that provides you with an immediate and up-to-date overview of all your life insurance and investment policies by sourcing information from all the major life insurance companies – and presenting the information in a comprehensive report.
With VeriFi you are able, for no charge, to access information on all your life and investment policies at a glance. You are able to check the types of policies you have, the names of the insurance companies providing the cover, the nature and extent of the insurance cover provided – and other vitally important information such as the details on your policies being correct.
To find out more, please visit: www.verifi.co.za