Human-Life Approach

Reviewed by Sweta | Updated on Jul 26, 2021



The human-life method refers to a method of calculating the necessary insurance protection for loss of life. The method calculates the insurance cover amount based on the risk of financial loss to the family of the insured.

The insurable event is the death of the individual. A life insurance contract should satisfy all essential elements of a contract, such as insurable interest, risk of loss, insured, and an insurer.

Understanding Human Life Approach

An insurer should consider many factors while entering into a life insurance contract. The factors include age, gender, annual income, expected date of retirement, pre-existing medical illness, and habits if any. An insurance company adopts the human life approach in case of families who are mainly or wholly dependent on the income of certain individuals in the family.

There is also an estimation of the expected financial loss to the family in the event of the death of the earning individual. The focus is not just on the immediate financial loss, but also on the future financial requirements of the family and keeps in mind the time for which the family needs financial support.

The objective of the human-life approach is to ensure that the family of the insured is not left in distress. The approach is in contrast to the needs-based approach. The latter approach seeks to determine the value of the individual in monetary terms for the family members. While making the policy, the insurer also considers the details of family members and the history of any hereditary ailments.

While estimating the amount of the insurance cover, the insurer must also consider the monthly expenses and provision for medical insurance and other coverage for the whole family. The need for replacement of family assets for daily use, such as a motor car and other things essential as per the living standards of the family.


The calculation of the value of an insured takes into account the future earnings over the remaining life of the insured. Then, calculate the average of the monthly income while also including any future increments. The resulting figure subtracts the tax costs on income. However, the aggregate value is in the future.

Hence, the insurer needs to determine the present value and accordingly calculate the premiums.

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