Risk Differentiation Underwriting
If you’re considering purchasing a term life insurance policy, you likely have a lot of questions about how much coverage is right for you and your family before you request an insurance quote.
Determining the right amount of coverage that works for your budget and provides adequate insurance protection can be intimidating, but is essential when determining the amount of coverage that's right for you and your family (if you're in the market for a new home, see the benefits to shopping your own mortgage).
This blog post will provide insight into how much term life insurance you need and how to approach (and feel confident) making an informed decision about insuring yourself and/or loved ones for the future.
The concept of Human Life Value (HLV) was originated by Dr. Solomon S. Huebner, making HLV the standard method of calculating insurance value and need.
The Human Life Value approach (HLV), or Ideal Life Cover, is the total value that represents the current and future amount associated with day-to-day expenses, long term liabilities, and any investments you may have. When calculating how much term life insurance you need, knowing your HLV is an invaluable way to ensure your dependents have enough money required for the future, in case you die.
HLV puts a value on the important question: what is the price of your life?
When deciding on life insurance, it is important to measure your economic worth. Human Life Value is the dollar value of your economic worth in terms of what you create for the people who depend on you. This is calculated, so that when you die, an amount equivalent to the HLV should be available so that the people dependent on you can lead their life properly.
There are seven main topics that are taken into account to calculate your HLV, which include:
Looking for term life insurance cost calculator? Try our Human Life Value Calculator below!
Capitalized earnings is a methodology in the income valuation method, which converts an income stream into an indicator of market value.
Capitalization of earnings is used to determine the value of an organization or business by calculating the worth of its anticipated profits based on current earnings and expected future performance.
Calculating the Capitalization of earnings helps investors determine the potential risks and return of purchasing a company. This concept can also be applied to individual subsidiaries, product lines, products, and work centers to determine their value for further investment purposes, such as term life insurance.
To calculate earnings by the Capitalization of earnings approach, the company takes future earnings and divides them by an expected Capitalization rate. The formula is Net Present Value (NPV) divided by Capitalization rate.
The Capitalization rate is the rate of return an investor can expect on its investment. Higher risk companies, for example specialty pharmacies and Ketamine clinics, and companies relying on equipment, like engineering, that depreciates over time have higher Capitalization rates.
Learn more about term insurance for business owners.
The results of this calculation must be understood in light of the limitations of this method.
The Capitalization of earnings approach requires research and data about the business. Depending on the nature of the business, generalizations and assumptions might be required when calculating the value. The more structured the business is, the less impact any assumptions and generalizations my have.
Startup companies, like our friends at Vested Marketing, often lack large data sets for their financial results. For these reasons, assumptions used in generating a figure for Capitalized earnings for a startup can have a significant impact of the calculation.
Looking for term life insurance cost calculator? This calculator uses an investment return that guarantees enough earnings each year, which makes this form much more efficient than others. Try our Capitalization of Earnings Calculator below!
When searching for a term life insurance policy, it's important to understand the amount of coverage you need for your beneficiaries.
EGGRS Human Life Value Calculator and Capitalization of Earnings Calculator are the perfect tools in assessing your needs.
Try our free term life insurance premium calculator today!
Our process is easy and hassle free. To request a quote for term life insurance, click below to fill out an application!
Interested in convertible term life insurance? Click here!
Learn more about term vs whole life insurance here!
What are insurance rates looking like in 2023? View 2023 rates here!
EGGRS understands the importance of preparing for unexpected changes while keeping your busy schedule in mind, so we have created an efficient process that anyone can follow.
Our ideal, uncomplicated process allows you to do everything online, including requesting life insurance coverage and receiving it within 20-30 business days. Our services include term life insurance, risk differentiating underwriting, request a quote, and free calculators. Contact EGGRS for more information!
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