Human-Life Approach

A method of calculating the amount of life insurance a family will need based on the financial loss the family would incur if the insured person were to pass away today. It is usually calculated by taking into account a number of factors including but not limited to the insured individual's age, gender, planned retirement age, occupation, annual wage, employment benefits, as well as the personal and financial information of the spouse and/or dependent children.

Since the value of a human life has economic value only in its relation to other lives such as a spouse or dependent children, this method is typically only used for families with working family members. The human-life approach contrasts the needs approach.

Remember, when using the human-life approach, you'll want to replace all of the income that's lost when an employed spouse dies. To be more precise, you'll want to include only the after-tax pay, and make adjustments for expenses (like a second car) incurred while earning that income. Also, don't forget to add the value of health insurance or other employee benefits to the income number.