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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products

Meera, 40, buys a 20-year term plan with a sum assured of Rs 1 crore. Her annual income is Rs 18 lakh and she has a home loan of Rs 40 lakh outstanding. Using the human life value approach, which is most appropriate for the adviser to base her need on?

The human life value approach measures insurance need as the present value of the client's future income that would support the family, net of her personal consumption. It focuses on income replacement rather than only the loan or what premium she can afford.

  1. AThe present value of her expected future income contribution to the family, net of her own consumptionCorrect
  2. BOnly the outstanding home loan amount
  3. CThe premium she can afford this year
  4. DThe maturity value of her existing savings

Explanation

Human life value estimates the present value of future earnings that the family would lose, after deducting the person's own expenses. The loan alone ignores income replacement, and affordability of premium is not a measure of need.

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