Life Need Analysis And Concept Of Human Life
- 1. LIFE NEED ANALYSIS AND CONCEPT OF HUMAN LIFE VALUE GROUP MEMBERS AMIT JOSHI ANIL KUMAR AVDHESH RAJPUT NIKHIL GUPTA NILESH KUMAR RAHUL SOODEY RISHAP KUNDRA
- 3. WHAT IS LIFE NEED ANALYSIS? By word “ life need analysis” we convey what actual amount would be needed to maintain the surviving dependants for the period they remain dependants. It provides ample information to establish the most effective means for that potential loss. Considerations : 1.Personal. 2.Property. 3.Liability.
- 4. WHY DO WE REQUIRE LIFE NEED ANALYSIS? Needs Analysis can help determine the right amount of life insurance that is appropriate for your needs. It explains the overall principals behind estimating the costs associated with the death or disablement of an income earner and the provision of ongoing support for any dependants and/or the insured.
- 5. Cont.. Also outline the factors to consider in the planning the amount of cover for short term disablement or illness. Again it explains how the value of property assets should be estimated for insurance purposes and develop a comprehensive and integrated set of insurance policy options for the particular clients needs and circumstances.
- 6. METHODS OF CALCULATING INSURANCE NEEDS OF INDIVIDUALS… 1 HUMAN LIFE VALUE APPROACH. 2 MULTIPLE APPROACH. 3 NEED BASED APPROACH.
- 7. HUMAN LIFE VALUE Concept of HLV help us to arrive at a fairly estimated insurance need for an individual who has to manage day to day maintenance, well being of all his dependants and also has to provide for financial securities in future to theses dependants in case of his premature death, through a life insurance cover ONE of renowned professor S.S.HUEBNER Defines HLV as “HLV of any person can be measured by capitalized value of that part of his income or income earning capacity devoted or meant for dependants arising out of economic forces incorporated within his being, like character, health education, training, experience and ambition”
- 8. Let's see this example for better understanding- Age of 'X' : 40 yrs Retirement age : 60 yrs Current salary : 300000 per annum (expected to remain same) Personal expenses : 125000 Net contribution to family : 175000 (300000 - 125000 ) Suppose 'X' dies at the age of 40. Income lost by the family : 175000 * 20 yrs (60 - 40) * discount rate for 20 yrs (Present value factor): 1900000
- 9. HLV calculation methods adopted by ICICI Prudential Life : HLV based on : Age Retirement Age Financial Assets (TA) Liabilities (TL) Cash Inflows % of increase in Income Flow (Assuming Fixed Int Rate) Existing SA (SA) Addl SA = CPRO + TL - TA - SA CPRO - Capital Required to protect life style
- 10. MetLife - HLV Calculator : HLV based on : Current Age Anticipated age of retirement Annual Income Annual Increase Tax Bracket/Rate Monthly Expenses (Self) Investment Return Rate Current Life Insurance
- 11. Here's an example to understand this better. Let's calculate the HLV of Vivek, who is married and has a child. In the table all the information about Vivek, his family and their needs is provided. A couple of points from the table need to be explained in more detail.
- 12. PARTICULARS VIVEKS AGE Years 30 AGE OF SPOUSE Years 27 LIFE EXPECTANCY OF SPOUSE Years 70 AGE OF CHILD Years 3 CHILDS SHARE OF MONTLY HOUSEOLD EXPENDITURE % 10 CHILD WILL REMAIN DEPENDANT TILL Years 22 Monthly household expenditure Rs 40000 Of the above, how much is spent on Vivek Rs 10000 Expected inflation in household expenditure % 5 Money to be set aside for child's education (in present value terms) Rs 1,000,000 Money to be set aside for child's marriage/other needs (in present value terms) Rs 750,000 Outstanding loans Rs 1,500,000 Other liabilities Rs 500,000 Medical expenditure/emergency fund Rs 500,000 Rate of return on low risk securities/deposits Rs 8 Human Life Value Rs 16,645,475 If the rate of return on low risk securities/deposits is 7 Revised Human Life Value Rs 18,183,996
- 15. To conclude, with respect to the concept of HLV, here are some key points – One, HLV is a moving target and to make it meaningful, you must review it once a year. Rather than chasing the revised HLV year after year, the aim should be to get the broad trend right with the expectation that in the long-term, the actual and estimate will converge. Two, do not get overawed by the HLV numbers thrown up. The `number' is just a starting point and must be put into the context of your present ability to set aside money. Three, remain disciplined in the sense that at any point in time you should have planned in such a manner that in your absence, your family will not need to compromise on their yet-to-be fulfilled needs.
- 16. THANK YOU AND FURTHER QUERRIES ARE HEARTLY INVITED!!!!