Human Life Value Calculator: Determine Life Insurance Based on Future Earnings
Human Life Value Calculator
One of your most important assets is your ability to earn a paycheck and generate income. This calculator is designed to help you understand today's value of your future earnings. Use this calculator to determine your economic value for your loved ones... your
Human Life Value.
Then, use this Human Life Value as the basis for determining how much Life Insurance is needed to protect your family by replacing your income in the unlikey event of death.
Human Life Value - Definitions
The human life value calculator
helps you assess the financial value to those you love by estimating the future financial contributions you will make to your family. Put another way, it helps determine the financial loss that your family would incur if you were to die today. For the purposes of this calculator, a human life only has economic value in its relation to other lives -- a spouse and dependent children. This calculator is intended to provide only a rough estimate of the value of human life, which is one factor in determining the amount of life insurance you need.
Years until retirement - Number of years before retirement.
Current annual income - Your current annual income. If you are married, this should not include any income from your spouse.
Return on investments - This is the annual rate of return you expect from your investments after taxes. The actual rate of return is largely dependant on the type of investments you select. From January 1970 to December 2007, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.4% per year (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, and the lowest was -39%. Savings accounts at a bank can pay as little as 1% or less.
It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
Insurance products may additionally include mortality, expense risk charges, cost of insurance, administrative, and surrender charges that will have a significant impact on the total rate of return for the investment.
Expected annual inflation rate - What you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI), which has a long-term average of 3.1% annually, from 1925 through 2007. The CPI for 2007 was 2.4%, as reported by the Minneapolis Federal Reserve.
Expected income growth - Annual percent increase you expect in your annual income.
Human life value - This is the total amount you would need invested today, to equal the total earnings of a person's lifetime. Two values are calculated for you. The first includes only your expected income growth, the second includes your expected income growth plus the impact of inflation.
In addition to having the right amount of life insurance, uses this CD calculator to see what is required to save a million dollars, or the 401k calculator to determine how you can develop an effective retirement stategy to build your retirement nest egg.