What this calculator does
The Human Life Value method estimates how much a person’s future earnings are worth today, by discounting the income they are expected to earn over a chosen number of years back to a present-day lump sum. It is a long-established actuarial approach to sizing life insurance from expected future earnings, rather than from a list of specific obligations.
This is a different method from DIME. DIME adds up concrete categories, debts, income replacement, mortgage and education, into a total. Human Life Value instead treats the person’s income itself as the asset being insured, and asks what that stream of future earnings is worth today once a discount rate is applied. The two can produce quite different figures for the same person, since they are answering related but distinct questions.
The formula
Multiply annual net income by a present-value annuity factor: one minus (one plus the discount rate) raised to the power of negative the number of years, all divided by the discount rate. This is the standard formula for the present value of a level annual amount received for a fixed number of years.
| Term | Meaning |
|---|---|
| Present value | Today’s lump-sum equivalent of the future income stream being valued. |
| Annual net income | The yearly income, after relevant deductions, being valued as a future earnings stream. |
| Discount rate | The rate used to convert future income into today’s dollars, reflecting the time value of money. |
| Years | The number of future years of earnings being included in the valuation. |
The inputs explained
| Field | What to enter |
|---|---|
| Annual net income to replace ($) | The annual net income to be valued as a future earnings stream. |
| Discount rate (%) | The discount rate used to bring future income back to a present-day value; a higher rate produces a lower present value. |
| Years of future earnings to value | The number of future years of earnings being valued, often chosen as remaining working years or years dependants will need support. |
When to use it
Sizing coverage from career earnings rather than fixed obligations
For someone whose family depends heavily on their ongoing income rather than a specific set of debts, Human Life Value frames the insurance need around replacing that income stream directly.
Comparing against a DIME estimate
Running both methods side by side and comparing the results gives two independent perspectives on a coverage need, useful context before settling on an actual policy amount with a licensed insurance professional.
Testing sensitivity to the discount rate assumption
Because the result is sensitive to the discount rate chosen, checking the present value at a couple of different reasonable rates shows how much that assumption alone is driving the final figure.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How present value changes with the discount rate
A fixed $60,000 annual income over 20 years, across a range of discount rates.
| Discount rate | Present value of future income |
|---|---|
| 2% | $981,086.00 |
| 3% | $892,648.49 |
| 4% | $815,419.58 |
| 5% | $747,732.62 |
| 6% | $688,195.27 |
| 8% | $589,088.84 |
How present value changes with the number of years valued
A fixed $60,000 annual income and 4% discount rate, across a range of valuation periods.
| Years valued | Present value of future income |
|---|---|
| 5 yrs | $267,109.34 |
| 10 yrs | $486,653.75 |
| 15 yrs | $667,103.25 |
| 20 yrs | $815,419.58 |
| 25 yrs | $937,324.80 |
| 30 yrs | $1,037,522.00 |
Questions
How is this different from the DIME method?
DIME totals specific named obligations, such as debts and a mortgage balance, alongside a simple multiple of income. Human Life Value instead discounts the full expected future income stream back to a present value using a discount rate, a more formal actuarial technique that does not reference specific debts or goals at all.
What discount rate should I use?
There is no single correct rate; it is meant to reflect a reasonable long-term rate of return or the time value of money, and different practitioners use different assumptions. A licensed insurance professional can advise on a rate that fits the purpose of a specific valuation.
Why does the present value not simply equal income multiplied by years?
Because a dollar received many years from now is worth less today than a dollar received sooner, the discount rate reduces the weight given to income further in the future, so the total comes out lower than a straight multiplication once any discount rate above zero is applied.
Is this figure the amount of life insurance I should buy?
It is one input into that decision, not a final answer. It does not account for existing assets, other insurance, or a family’s actual spending needs. Treat it as a data point to discuss with a licensed insurance professional rather than a number to act on directly.
For a simpler obligations-based estimate, see the DIME method calculator. To compare policy pricing once a target coverage amount is chosen, use the premium per $1,000 calculator.