What is HLV Calculator and how to use it?

what-is-hlv-calculator-and-how-to-use-it

• The kind of life insurance plan you want
• The insurance company from whom you want to buy your life cover
• The period over which you want the cover to be valid
• The add-on life insurance riders you wish to buy, if any

But along with all these parameters, there’s one other factor that you need to put a great deal of thought into choosing. And that is the amount of coverage you wish to purchase.

Your life insurance plan should give you adequate coverage. Otherwise, the financial benefits offered by the policy may not be sufficient to protect your loved ones in your absence, or to help you achieve your life goals as planned. So, before you purchase a life insurance policy, you need to get a good idea of the amount of coverage you need.

Ideally, depending on the purpose for which you buy a life insurance plan, your life cover should be able to cover the following costs or items –

• Your family’s everyday expenses for the foreseeable future
• All the debts and liabilities in your name
• The cost of your major life goals, like your children's education costs, their wedding expenses, your retirement needs, etc.

Since there are several factors to consider while determining the amount of life insurance you need, it helps to have a concept or a technique that you can rely on for this estimation. And here’s where the Human Life Value approach (HLV) comes in.

The Human Life Value or HLV is simply the present value of all the future income that you will be able to earn for yourself and your loved ones over the course of your life - until your retirement. It also includes the present value of your investments and liabilities.

This sums up the meaning of HLV. It essentially helps you determine the amount of financial loss that your family will have to endure in case something untoward happens to you. And based on this estimate, you can get a fair idea of the amount of coverage you require.

The HLV formula used to compute the amount of coverage needed can be income based or need based. But whichever method you choose, it is not possible to estimate these costs manually.

Fortunately, there’s a nifty online tool you can use for this purpose. And that is the Human Life Value calculator.

The HLV calculator is an online tool that can give you an estimate of the amount of life insurance you need to secure the future of your loved ones. It is free to use, and all you need to do is enter a few basic particulars about yourself. The HLV calculator then automatically computes the amount of life insurance coverage you need.

If you want to get a better idea of how this online tool works, you can check out the ABSLI Human Life Value Calculator. Here is a quick walkthrough to help you understand how this calculator works, and what you need to do to get a better idea of your HLV.

Step 1: Enter your personal details
You need to enter your current age and the age at which you wish to retire.

Step 2: Enter your financial details
Next, fill in the details of your monthly income and the existing life insurance cover you have.

Step 3: Enter your insurance details
Finally, you need to select whom your life insurance is supposed to protect. The options include your spouse, your children, your parents, and other loved ones. You can select as many of these as needed.

Step 4: Find out your HLV
Once you’ve entered all the details outlined above, the HLV calculator shows you the amount of additional cover you need.

Practically speaking, there are two ways to calculate the Human Life Value, namely the income method and the expense method. Let’s take a closer look at these two options.

• The income method
  Also known as the income replacement method, this HLV formula takes into account the fact that in case of the policyholder’s demise, their life insurance coverage should be sufficient to replace the loss of income. The factors typically considered in this HLV formula include –
  • Your current income
  • Any expected increase in income
  • Your outstanding loans
  • The number of years left till you retire


• The expense method
  The expense method or the need-based method uses a HLV formula that accounts for the expenses and requirements of the surviving members of the family, in case of the policyholder’s demise. Here, the following factors are used to calculate the HLV –
  • Your current expenses
  • Any expected increase in income
  • Your outstanding loans
  • The number of years left till you retire

A HLV calculator can help simplify one of the most important financial decisions you will make in life. Since the tool is easy to use and available free of charge, it is a good idea to make use of the HLV calculator before you decide on the amount of coverage you wish to buy. That way, you can make sure that you get the right amount of life insurance needed to secure your family’s future.

Read next: How much should you ideally invest every month?

Like insurance, investments are also pivotal to achieving your life goals. And today, you can even invest small sums on a monthly basis. But knowing how much you should invest each month is just as important as knowing the amount of life cover you need. Having trouble figuring out your monthly investment budget? We have a blog that can help you out.