Enter any 4 of the 5 fields (annual net income to replace, years until retirement, discount rate, additional debts/lump-sum needs, and HLV) to calculate the missing value. If you have no additional debts or lump-sum needs, enter 0.

Human Life Value Calculator

Enter any 4 values to calculate the missing variable (enter 0 if a value does not apply)

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Human Life Value Formula

The following simplified formula is commonly used to estimate Human Life Value (HLV) as the present value of an income stream through retirement, plus any additional lump-sum needs (such as debts):

HLV = D + I \cdot \frac{1 - (1 + r)^{-n}}{r}

Variables:

  • HLV is the Human Life Value (an estimate of the present value of income to be replaced, plus lump-sum needs)
  • I is the annual net income to replace (often estimated as annual income minus personal living expenses and other non-replaceable amounts)
  • n is the number of years until retirement (the number of annual payments to replace)
  • r is the annual discount rate (as a decimal; if the input is a percent, use r = rate/100)
  • D is additional debts or other lump-sum financial needs (in today’s dollars)

To estimate the Human Life Value using this model, first estimate the annual net income you want to replace (for example, income minus personal expenses). Then calculate the present value of receiving that amount each year for n years discounted at rate r using the annuity present value factor. Finally, add any additional lump-sum needs such as debts. (If r = 0, the annuity present value simplifies to PV = I · n.)

What is a Human Life Value?

Human Life Value (HLV) is a concept in insurance and financial planning that estimates the economic value of a person’s future earning capacity to their dependents. It is often used to help estimate how much life insurance coverage may be needed so beneficiaries can remain financially secure in the event of the insured person’s death. Depending on the method used, an HLV estimate can consider income, personal and household expenses, debts, time to retirement, inflation, and an expected rate of return (discount rate). HLV is not a measure of a person’s worth in emotional, social, or non-economic terms; it is a tool for financial risk planning.

How to Calculate Human Life Value?

The following steps outline one common way to estimate the Human Life Value:

  1. Determine the individual’s annual income ($).
  2. Estimate the annual net income that would need to be replaced (often annual income minus the insured person’s personal living expenses and other non-replaceable costs).
  3. Determine the number of years until retirement (remaining working years).
  4. Choose an appropriate annual discount rate (expected annual rate of return, expressed as a percent).
  5. Calculate the present value (PV) of the net income stream using: PV = I · (1 − (1+r)−n) / r (or PV = I · n if r = 0).
  6. Add any additional debts or lump-sum obligations (in today’s dollars) to the PV.
  7. The result is the estimated Human Life Value (HLV).

Example Problem:

Use the following variables as an example problem to test your knowledge.

Annual income ($) = 50,000

Years until retirement (n) = 40

Expenses ($) = 30,000 (so annual net income to replace, I = 50,000 − 30,000 = 20,000)

Discount rate (%) = 5

Additional financial obligations or debts ($) = 20,000; Estimated HLV ≈ 20,000 + 20,000 × (1 − 1.05−40) / 0.05 ≈ $363,182