September 2004

Survey finds ‘insufficient funds’ on human life value

Like it or not, you can put a price tag on your life, and it's an important consideration when you're buying life insurance, according to the nonprofit Life and Health Insurance Foundation for Education (LIFE).

Survey results just released by LIFE, the educational arm of the life insurance industry, show that a large gap between the average American's human life value — the financial loss that person's family would suffer if he or she died today — and how much life insurance the average American has.

LIFE's Human Life Value study looked at 354 working Americans who earn at least $25,000 a year and range in age from 25 to 44. Because a Human Life Value calculation measures a person's economic value to others, this study looked exclusively at working Americans who were married or had at least one child under the age of 22 or both. The average annual income in the study was $46,098.

Survey respondents had an average human life value of $803,788, with men having a human life value of close to $1 million ($992,488) and women having a human life value of $661,835. This is the amount of money that would be lost to survivors at the death of a spouse. The study found that respondents had relatively modest amounts of life insurance coverage compared to their human life values. On average, men in the study had $288,520 in life insurance coverage or 29 percent of their human life value. Women had an average of $165,245 in life insurance coverage or 25 percent of their human life value.

"What this basically means is that if the average male breadwinner were to die right this minute, his family would need $1 million if the goal was to provide them with the same standard of living they would have enjoyed had he lived," said David F. Woods, CLU, ChFC, president of LIFE. "That person probably doesn't need $1 million in life insurance coverage because his wife might be able to make more money by changing jobs or make other financial adjustments, but leaving his family with less than $300,000 would clearly put his loved ones in a big bind."

The concept of human life value is most often used in wrongful death cases to determine a family's economic loss when a loved ones dies in an accident or other catastrophe. The Human Life Value calculator used in LIFE's study was developed by Litigation Analytics, Inc., a Ridgefield, Conn.-based firm that provides expert testimony in court cases.

A modified version of the calculator used in the study can be found on LIFE's Web site at www.life-line.org/humanlifevalue.

Source: Life and Health Insurance Foundation for Education, www.life-line.org/ .

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