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E.
The human life value concept is generally associated with life insurance. The
concept, however, is not limited to insurance in its application and has been used
in many other areas of economic theory
and practice. Estimates of the value of
human beings as capital are useful for a
variety of purposes.' An analysis of population and migration could well include a
consideration of the value of the people
involved. Public policies and projects
regarding health, highway construction,
flood control, education,2 and rehabilitation should reflect the extent to which
human life values are increased.3
The desirability of using per capita human capital values as a welfare index has
been suggested.4 Such an index would
reflect present and future mortality,
health, employment, and earnings. Since
all of these factors affect the general welAlfred E. Hofflander, Jr., Ph.D., is Assistant
Professor of Insurance in the University of Texas.
Prior to going to Texas in 1963, Dr. Hofflander
taught at North Florida Junior College and at
Florida State University. He was a Fellow in the
Huebner Foundation and was formerly Editor of
HOFFLANDER
( 529 )
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530
8 S. S. Huebner, The Economics of Life Insurance, (3rd ed., New York: Appleton-CenturyCrofts, Inc., 1959), p. 5.
9ibid., p. 18.
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531
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532
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533
(e)
w 1
(l)
H,
(w-y+12
y+l( 12-
+(e)
fy+1/2 v
y=x
(e)
w-1
(II
(1
(W,y
12
my) y+i
(e)
(III)
~~(e)
H,,
(II)
y+1/2-x
y+1ll2-x
(Wyfy+1/2-My)
ly+l12 v
y =x
w-1
y+1/2-x
(e)
(IV)
Hx
(wy fy+1/2-
my)
fy+1/2
~~~(e)
W-1
(III)
i-
lx v
y =x
(I)
Definition for Life Insurance. H x represents the present value of the future
gross earnings of the group. If this figure
(v)
some validity in using H. as the definition of the human life value under certain
circumstances.Unless special information
exists to the contrary,however, one cannot assume that those who are unemployed in one period are the same as those
who are unemployed in the subsequent
period. The given assumption regarding
the homogeneity of the group prohibits
such an assumption in this case. Since
there is no way to determinein advance
which of the members will be in the unemployed group, one must consider the
total class.
(III)
w-1
H1
(WY
ly+l/2
fy+1/2
/)
(Ix
y =x
If the purpose of life insurance is to replace the average future gross earnings
of the group, then this would be, on the
average, the correct amount of life insurance to purchase."1While this figure has
the advantage of simplicity, it ignores
many factors, including the cost of selfmaintenance.
(II)
w-1
(e)
(VI)
H,=
w-1
(e)
wY fy+1/2-my)
+l /2-x
'1y+1/2 vy1)
y =X
H,,
(W
(Y,f2
- my)
(1y+l1
y+1 /2-x
(e)
2fy+l1
2V
(e)
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534
1
(e)
(VI)
Hx
wy fy+1/2-my) k1y+1/2V
X-
y+l/2-wx
y =x
(III)
(IV)
Dividing Hx
(VIT)
by l, yields Hx
w-1
w-1
(VII)
Hx
(e)
X
y
(wY
fy+l
/2-my)
/2-x
V
Ix < r
-
1
r
HI
12
The equations developed in this section are
also applicable to employer's liability.
1
(Wy
fy+l/2-my)
(1y+1/2
)+
VY
y=x
where: x
If H,
or
w-1
(e)
(VII)(
Fi
y=x
{
-(my
/2-x
y+l~~+
ly+1/2)
/lx]
tion of Hx
(e)
a better understanding of
(e)
(VII)
identical to Hx
except that Hx
dis-
(VIII)
Hx
13
is adjusted to
One theoretical consideration which may be
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535
(e)
(IX)
i)
(fy+1/2+fy+1/2/
14
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536
nated beneficiary if the beneficiary survives the insured. The probability of the
dependent's continuing to live after the
death of the breadwinner is considered in
programing through the use of settlement
options based upon life contingencies.
While he may be aware of this distinction, there are two reasons why a prospective insured might wish to ignore the life
contingencies of his dependents. He may
wish to purchase an amount of insurance
equal to his human life value, making the
assumption that his dependents will still
be alive and be in need of his support.
This would be a conservative approach,
and considering the importance of the
undertaking, it is not completely unlikely.
On the other hand, he may be aware of
the fact that the funds provided by his
insurance will be more than are needed
by his dependents, but may wish that the
excess, if any, be left to some charity or
similar organization.
Summary
Very little effort has been expended in
investigations into the meaning(s) of the
human life value concept, most authors
being content with a general statement
regarding its usefulness. The human life
value is not one value or concept, but
rather it is many values. Each value must
be defined carefully in order to be appropriate for its expected use. This paper
develops four models or mathematical definitions of the human life value.
Unfortunately these models are at the
moment, only theoretical because the data
necessary to use them are unavailable.'8
As in most fields of endeavor, abstraction
precedes realization.
18For a discussion of the problems involved
in obtaining data on age, income, and occupation,
see A. E. Hofflander,"Salary Scales: An Aggregate Approach," Journal of Risk and Insurance,
Vol. XXXII, No. 4 (December, 1965), pp. 571-8.
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