Calculate the Right Life Insurance Cover

Get the right life insurance cover in 3 steps!

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The Human Life Value (HLV) approach to calculating life insurance requirements accounts for 4 factors:

• Annual income• Annual expenses• Number of years to retirement• Inflation-adjusted cost of expenses

Human Life ValueThe HLV figure you arrive at should help you make a reasonably accurate assumption of the value of your income.

Step I

• Your Annual Income = salary+bonus+employee benefits+income from investments.

• Deduct your personal expenses (food, clothes, travel, etc) from the above.

• What is left, is what your family consumes per annum.

Step II

• See how many years are left till you retire.

• Project family expenses upto retirement, allowing for reasonable increments.

•Subtract any pension benefits your family gets upon your death.

•Add non-recurring expenses, like your children’s higher education.

The shortfall of the below mentioned expenses is the amount that you should insure yourself for.

Step III

• Calculate the shortfall’s present value, allowing for a reasonable rate of inflation.

• Factor in your existing investments by deducting your net worth and accounting for any big-ticket loans, to arrive at a reasonable HLV figure.

Know Your Life Cover Needs

• The HLV figure you arrive at should help you ascertain the amount of life insurance cover you need.

• Since HLV is a moving target, keep reviewing it every 5 years, at the least.

Thank YouGet the right life insurance cover in 3 steps!

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