Dictionary of Insurance Terms: human life value approach (economic value of an individual life) (EVOIL)
human life value approach (economic value of an individual life) (EVOIL)
quantitative measure to determine the amount of life insurance required to replace lost future earnings of a wage earner. Three steps are used in arriving at the needed sum:
- Determine average yearly earned income devoted to a family in the future by the wage earner (AEIDF).
- Determine future number of years wage earner is planning to work (n).
- Determine the interest rate (i) (discount factor) to be used in calculating the present value of the average yearly earned income devoted to family.
The calculation uses this equation:
where m = last year at work before normal retirement
n = first remaining year of life
