You wouldn’t think of insuring half of your car, home or other important personal property, would you? Yet when people are looking to purchase life insurance, a common perception is that only some modest multiple of your income in terms of coverage is actually “needed.” However, this often falls short of what your actual earning potential would be over your lifetime – your so-called “human life value.”
Solomon Huebner, Ph.D., an early expert in insurance economics and risk management and known as the “father of insurance education,” defined human life value as “the capitalized monetary worth of the earning capacity resulting from the economic forces that are incorporated within our being: namely, our character and health, our education, training, and experience, our personality and industry, our creative power, and our driving force to realize the economic images of the mind.” *
Your largest asset
In layman’s terms, your full human life value must take into account the financial sum of all you could have earned or produced in your lifetime. It is arguably your largest asset and therefore, the key legacy for your family, business or charitable interests.
Huebner’s thoughts reinforce that there are many benefits that a family may enjoy from the protection of income, such as the purchase of a home and the rearing and education of children. While life insurance can never replace a person, the death benefit from the policy will help the survivors financially in the event of the insured’s death.
It is estimated that it takes the average family at least five to seven years to get their finances back on track after the death of a primary breadwinner.
To assess the financial loss your family would incur, try using this Human Life Value calculator to find what your estimated lifetime income would be.
What you have at work is probably not enough
You may think that the insurance policy you have through your workplace may be sufficient, but it usually only covers about 1.5 times your annual salary. It is estimated that it takes the average family at least five to seven years to get their finances back on track after the death of a primary breadwinner. And some times it takes a lot more than that. Your family’s financial security deserves a longer-term strategy.
The good news is that you don’t need to do this alone. It’s important to work with a professional financial representative you are comfortable with and have a conversation about what is right for your situation today.
Our lives are our most valuable asset; it’s time to protect your family or business with life insurance.
* S.S. Huebner, The Economics of Life Insurance, page 5, (Executive Asset Mgmt. 3rd ed. 1996) (1927)