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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

Caselet: Ms. Meera Nair, 35, is a salaried professional with a Rs 50 lakh home loan, a spouse and a child. She asks about the human life value (HLV) approach to determine life cover. Under the HLV approach, the cover is primarily determined by:

Under the human life value approach, life cover is based on the present value of the person's expected future income after deducting their own personal expenses. It measures the income dependants would lose if the earner died.

  1. AThe present value of her expected future income net of her personal expensesCorrect
  2. BThe premium she can afford each year
  3. CThe market value of her house
  4. DHer age multiplied by her current monthly salary

Explanation

The HLV approach estimates the economic value of the earner to dependants as the present value of future earnings less the earner's own consumption over the remaining working life. Affordability of premium and asset value are not the basis of HLV. The age multiple is not the method.

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