What is a feature of the formula for calculating individual life insurance needs using the Human life value method?

The Human Life Value method is a way to estimate an individual’s life insurance needs by calculating the present value of future earnings that the insured would potentially provide to dependents if they were still alive. This approach takes into account the expected income contributions of the insured throughout their working life and discounts those earnings to present value to determine how much insurance coverage is necessary to replace that potential income in the event of their untimely death.

Estimating the present value of future earnings is crucial as it provides a quantifiable measure of the economic loss that would occur to the dependents and beneficiaries of the insured. This method is particularly useful because it directly links the life insurance coverage needed to the financial dependents’ needs and the insured individual's income-generating potential.

In contrast, other methods mentioned either focus on different aspects of financial planning or do not emphasize the income replacement feature, such as focusing solely on current expenses or estimating future costs after death, which do not capture the systematic approach of valuing future earnings in a comprehensive way.