Human Life Value: Putting a Dollar Figure on a Paycheque (LLQP)
The human life value (HLV) approach calculates how much life insurance a person needs by estimating the present value of their future earnings that would be lost to their family if they died today.
The logic: a breadwinner's economic worth is their ability to earn. Die at 40 with 25 earning years left, and the family loses that entire income stream. HLV converts that stream into a single lump sum — roughly, annual income contributed to the family × years remaining until retirement, discounted to today's dollars, minus personal consumption and taxes.
Why it matters on the LLQP exam
The exam tests HLV mainly by contrasting it with the needs approach — see needs analysis. The distinctions to hold:
- HLV asks: "What is this life worth economically?" It starts from income and projects forward.
- Needs approach asks: "What would the survivors actually need?" It starts from expenses — mortgage, education, income replacement, final costs — and works backward.
- HLV tends to produce larger insurance amounts for young high earners and ignores assets the family already has; the needs approach nets existing resources against obligations.
Simple HLV questions on the exam are arithmetic: multiply the income the family depends on by the years of dependency (the exam usually skips discounting unless stated). E.g., $60,000 of family-dependent income × 20 years = $1,200,000 of human life value.
Trap: HLV is an income-based ceiling, not a recommendation by itself — a proper recommendation combines it with actual needs and affordability.
Example question
Using the human life value approach, a 40-year-old earning $75,000 per year until age 65 would represent an economic value of approximately:
- $75,000
- $750,000
- $1,875,000
- $3,000,000
Answer: C — $75,000 × 25 remaining working years = $1,875,000 before adjustments.
Compare this with the needs analysis method and related riders like the accidental death benefit rider in the life insurance hub.