What is the monetary value of a human life ?

Have you ever wondered what is the monetary worth of your life and how much compensation could your family members possibly get if you were to pass away ? The answer leads to the question – how much life insurance can you get ? Before we get there, it is important to note that you need to be aware of the ways to calculate your life insurance needs – read it before you go any further. Having understood that now, you should now find out how much life insurance do you actually need using the calculator.

Let’s see where we go on the topic of the monetary value of a human life and how much you can actually take and get from life insurance companies.

The purpose of insurance

The purpose of insurance is to put you back in the same economic state before a loss occurred. Note the word economic here. The word is important. It is not possible for insurance to put you back in the same emotional state before the loss occurred, after all that is something which every individual has to deal with himself.

So when you get hospitalized for 24 hours or more, mediclaim or health insurance kicks in to take care of your reimbursements. So if you spend say Rs 50,000 during the hospitalization, the insurance company will refund that amount to you if all documentation is right and you meet their requirements. In this way, the insurance company via the concept of insurance has put you back in the same economic state as you were earlier to the loss.

But in life insurance, you die. As hard as it may sound while you are reading this, the concept of life insurance is that you or your family members get some amount of money when you pass away. To put it bluntly, you are not around to spend the money but you can watch others spend it !

The question now is how much amount of compensation should a insurer give when a person dies ? Can you assign an amount to a person’s life ? How dear is death and life to a human ?

Author J.K. Rowling wrote this in “Harry Potter and the Deathly Hallows” book – “We’re all human, aren’t we? Every human life is worth the same, and worth saving.”  And the late Steve Jobs said this –  “No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new.”

The monetary value of a human life is unlimited

Death brings great loss to a family and the family needs to be compensated, monetarily. How much ?

In theory,  human life is priceless. That might lead you to think you can take unlimited life insurance ? Not really ! If that were the case, people would run amok and insure themselves of an indecent amount and then throw themselves off a cliff to leave behind a fortune for their loved ones. Insurance companies have their own checks and ‘tick in the boxes’ to ensure they insure a human life according to complex valuation methods.

I am not aware of the Indian government’s figures of how and what it pegs the monetary value of a human life as – Stanford economists have demonstrated that the average value of a year of quality human life is actually closer to about $129,000 in the US. You can read more on the value of a human life to delve deeper on this.

When I wear my financial planner’s hat, it is very clear to me that the value of a human life is approximately what someone earns in his/her lifetime and I open up tools and calculators to get to a quantitative figure.

If you are the primary earning member of your family, then check on whether you need to buy life insurance and be aware of the fact that term insurance is the most important and best form of life insurance that you should take. The other types of life insurance polices are investment products and it is always better to keep insurance and investment separate.

What in your opinion is the value of a human life ?