Human Life Value vs Needs Approach

The Human Life Value approach and the Needs Approach are two methods used to determine the appropriate amount of life insurance coverage for an individual.

Human Life Value is a holistic approach that calculates the economic value of an individual’s life based on their future earnings potential, financial contributions to their family, and other factors such as retirement, taxes, expenses, and inflation. It aims to quantify the financial impact of the individual’s death or disability on their dependents’ standard of living. This approach focuses on replacing the lost income and maintaining the financial stability of the family.

On the other hand, the Needs Approach determines the entire amount of capital needed at death. It considers factors such as outstanding debts,

funeral expenses, education costs for children, and any other financial obligations. The amount of life insurance is reduced by any existing liquid assets and income sources. The amount of the shortfall produces the amount of insurance needed.