Human Life Economic Value

This tool calculates the economic value of a human life. The human life value is the cumulative earnings during the individual's working lifetime plus the value of services he/she provides to the family minus the funds spent on self maintenance.

Explanation of some of the data entry fields:

Income Growth: The assumed annual increase in earning potential from raises or increased competency.

Fringe Benefits: Non-monetary benefits/compensation (like employer-sponsored health insurance) that the person brings to the family. If the insured were no longer able here, the family would need to pay to replace those benefits.

Services to Family: Activities/skills/jobs the insured provides to the family (like mowing the lawn, painting the house, supervising children) that would require money to provide through other means.

Self Maintenance: income spent on the insured (like clothing, medical costs, transportation).

After-Tax Rate of Return: This is also called the Discount Rate. The assumed rate of return one should conservatively expect to achieve on a lump sum payment intended to replace the insured's remaining earning potential.

No example script available for this screen.

The solution is documented using a worksheet with the following columns.

Column 1 is the age.

Column 2 is the annual income (inflated each year by the assumed income inflation rate.)

Column 3 is the personal maintenance costs for that year.

Column 4 is the value of non-monetary fringe benefits earned/provided by the insured.

Column 5 are the service replacement costs for activities provided by the insured.

Column 6, Annual Family Support, is the sum of columns 2 through 5.

Column 7 is the net present value of the annual family support when discounted using the after-tax rate of return (a.k.a. discount rate).

Column 8 is the cumulative sum of column 7.

Column 9 is the year.