Economics is a science. It goes to great and complecated extremes to categorize, quantify and explain such common funtions as consumption, distribution,production,exchange, the availability of money, the velocity of money, and the time value of money. It is ironic, then, that the one concept that has remained most elusive of scientific categorization is the one that makes all else possible – the human life value.
The basic premise is that nearly everyone has a human life value that should be assessed and protected in the same manner as any other valuable asset. Individuals capable of earning more than the amount needed for self-maintenance have an actual calculable monetary value to those who are dependent on them. Calculating this value is not an exact science and there is no single methodology prescribed for this assessment. Generally, we want to determine the capitalized value of an individual’s earning ability. This earning ability will vary according to education,income,history,personal drive and ambition, personality, character, health, training, experience, and other factors equally difficult to evaluate.
The purpose of calculating the human life value is to establish the basic for protection of that value against three types of income losses:
– Premature Death
– Income disrupting disability
– Retirement
Each of these three possibilities will end the income producing capacity of a human life. Without proper planning and protection the loss from any of these could devastate the family unit.The purpose of life and health insurance is to replace someone’s human life value in the event of death or disability(Long Term Care). Also, concurrently, accumulating cash values in a permanent insurance plan(Indexed Universal Life plans(IUL’s) with possible Growth, Capital Guarantee, Protection & Tax advantages) can contribute to a more secure retirement.
Lets take the example of a 35-year old earns a net income of $40,000 per year. If we assume that the worker gets no raise for the next 30 years, the economic value to the family is $1,200,000.00($40000 per year x 30 working years remaining to age 65)
“If you had a machine which produced $100 Dollar bills, $40,000 a year, Would you protect it against loss or breakdown?”