CAPITAL HUMAN NET

NEED LIFE WORTH

ANALYSIS VALUE

3 METHODS TO ESTIMATE THE

LIFE INSURANCE COVER NEEDED

E-LEARNING MODULE 10
25th and 26th Dec 2019
8pm to 10pm
 PLEDGE OF GOPAST
AS A MEMBER ASSOCIATED WITH GOPAST,
I PLEDGE THAT I WILL ALWAYS:
• BE GUIDED BY MY CONSCIENCE.
• SEEK EXCELLENCE IN ALL ASPECTS OF
MY LIFE
• HOLD MYSELF IN HIGH ESTEEM
• LABOUR TO LEARN AND RE-LEARN
• SUBMIT MY INTERESTS TO THE
INTEREST OF MY NATION

gopinathr@go-past.com
 HAVES HAVE NOTS

VERY FEW SO MANY

Have nots are many and Haves are very few; for only a few are devoted (तप#ा)
and majority are not devoted
270th Couplet

THIRUVALLUVAR

இலrபல ரா'ய காரணm ேநா.பாr

/லrபலr ேநாலா தவr. 2றll 270; தவm
 TO FOCUS

Focus is the outcome of devotion;

Devotion is the manifestation of passion;
Passion germinates from Purpose.
The bigger the purpose, sharper the focus.-rg

TO DE-FOCUS
 A Trade can be considered to be a trade only when the trader trades
as if the concerns of the buyer are his own.
120th couplet.

வா5கm ெசyவாrk2 வா5கm ேப5p

;ற<m தமேபாl ெச?@. 2றll 120; நA< Bைலைம
I am Happy marketing life insurance, when the prospect
buys, I am happy for him and his family;

When a prospect refuses to buy, I am still satisfied, that

I did my duty, undertaking the risk of being rejected.
 https://images.app.goo.gl/LchDTrTG8Djninv27

What is the most surprising thing in the world?

“Day after day countless people die. Yet the living wishes to be living.
ADVANTAGES OF LIFE INSURANCE
1. RETAINS PURCHASING POWER, WITHOUT
BREAKING ASSETS.

2. CAN NOT BE TAKEN AWAY BY WRONG PEOPLE

3. INDEPENDENCE LIFE LONG.

 WE ARE SHOWING
THEM THE BENEFITS
BUT

THEY ARE LOOKING

AT THE COST
 WHAT MOTIVATES?

SEEKING PLEASURE AVOIDING PAIN

 FUTURE
PLEASURE
WOULD LIKE TO SEEK THIS

WANT TO AVOID THIS

PRESENT
PLEASURE

PRESENT PAIN FUTURE PAIN

 LIFE INSURANCE

An instrument which transfers the

risk of loss of the income
due to the death of a person
to a group of people
who are also individually
exposed to that risk.
No catastrophic loss will happen to the wise, who
can anticipate (forecast) and guard against
coming evils (Risk management).
no:429

எEரதாk காk2m அGHனாrk 'lைல

அEர வJவேதாr ேநாy.
2றll 429
 WE ARE SHOWING
THEM THE BENEFITS

THEY ARE LOOKING

AT THE COST
HOW MUCH INSURANCE I MUST HAVE?
 SCIENTIFIC ESTIMATES

CAPITAL NEED ANALYSIS

HUMAN LIFE VALUE

NET-WORTH
CAPITAL NEED
ANALYSIS
 CNA (simple)

• Monthly income= ₹ 5,00,000.00

• Spent on self = ₹ 1,00,000.00

• To the family = ₹ 4,00,000.00

 UPON DEATH
THE FAMILY WILL LOOSE:

LOVE

AFFECTION

LEADERSHIP

AND ₹ 4,00,000 EVERY MONTH

I DON’T WANT THAT TO HAPPEN

I MUST HAVE AN ASSET OF

₹4,00,00,000 (@1%PM)

I MUST HAVE AN ASSET OF

₹8,00,00,000 (@0.5%PM)

AN ASSET WHICH IS
IMMEDIATELY LIQUID
FINANCIAL SUPPORT EMOTIONAL SUPPORT
WORKING CAPITAL
NEED ANALYSIS
 BUSINESSES

• FIXED CAPITAL
• WORKING CAPITAL

gopinathr@go-past.com
 WORKING CAPITAL
BUSINESS FAMILY

RAW MATERIALS AND FOOD, CLOTHES, SCHOOL

OTHER COMPONENTS FEES, ETc.,

SALARIES TO DRIVER,
SALARIES AND WAGES AND
MAIDS AND STAFF, RENTS,
OPERATING EXPENSES
MAINTENANCE, EB, WB, ETc

EMIs, INTEREST PAYMENTS EMIs, CREDIT CARDs,

TAXES PROPERTY TAX, ROAD TAX

 FAMILY MLY ₹ YLY₹

FOOD, CLOTHES, SCHOOL FEES, ETc., 40,000 4,80,000

SALARIES TO DRIVER AND MAIDS, 25,000 3,00,000
RENTS, MAINTENANCE, EB, WB, ETc

EMIs, CREDIT CARDs, 35,000 4,20,000

ar
PROPERTY TAX, ROAD TAX
um 0 0
n K
TOTAL n j a 1,00,000 12,00,000
R a
r.
50% OF THAT M 6,00,000
LIQUID CAPITAL REQUIRED (6%) 1,00,00,000
CASH AND EQUIVALENTS 10,00,000
REQUIRED 90,00,000
 ASPIRATION
IDEAL

USED TO

ADJUSTABLE

COMFORT DISCOMFORT

MINIMUM
PAIN

DISASTER

2015 2020 2025 2030 2035 2040 2045

 MLY AMOUNT
FAMILY CORPUS @6%
₹ 

FOOD, CLOTHES, SCHOOL FEES, ETc., 40,000

SALARIES TO DRIVER AND MAIDS,

RENTS, MAINTENANCE, EB, WB, ETc 25,000

EMIs, CREDIT CARDs, 35,000

PROPERTY TAX, ROAD TAX 0

TOTAL USED TO PER MONTH 1,00,000 2,00,00,000

ADJUSTABLE LEVEL 80,000 1,60,00,000

MINIMUM 50,000 1,00,00,000

ASPIRATION 1,50,000 3,00,00,000

 CAPITAL NEED
ANALYSIS
(4 TYPES OF CAPITAL)
 MINIMUM LIFE COVER TO PROVIDE FOR:

ON GOING ESSENTIAL
1 WORKING CAPITAL
EXPENSES

2 FIXED CAPITAL MAJOR RESPONSIBILITIES

OCCASIONAL EXPENSES RELATED TO

3 RESERVE CAPITAL AREAS OF INTEREST OR UN-FORESEEN
INCREASE IN WORKING CAPITAL

FULL AND FINAL

4 BORROWED CAPITAL
SETTLEMENT OF LIABILITIES

PRESENT VALUE OF ALL THESE REQUIREMENTS- C.N.A

 CNA
MR SUBRATO IS 35 YEARS NOW, AN ARCHITECT, IS HAVING A MONTHLY ON GOING
EXPENSES OF 1,00,000 PM (EXPECTED INFLATION @8% FOR FUTURE)

HE HAS OUTSTANDING LIABILITIES OF 75,00,000

HIS DAUGHTERS WILL REQUIRE 50,00,000 (2027) AND 60,00,000 (2029) LUMPSUM FOR
HIGHER STUDIES

HE ALSO WANTS TO PROVIDE 25,00,000 (2032) AND 30,00,000 (2034) FOR HIS
DAUGHTERS’ MARRIAGE

CONSIDERING A PROVISION OF 5,00,000 FOR EMERGENCY NEEDS

THE PV FACTOR TO BE USED FOR DISCOUNT IS 6%

PLEASE WORK OUT THE CNA FOR MR SUBRATO.

 Table 1

Years Exp Education Marriage Loans reserve

2019 12,00,000 75,00,000 5,00,000 92,00,000

2020 12,96,000 12,96,000

2021 13,99,680 13,99,680

2022 15,11,654 15,11,654

2023 16,32,587 16,32,587

2024 17,63,194 17,63,194

2025 19,04,249 19,04,249

2026 20,56,589 20,56,589

2027 22,21,116 50,00,000 72,21,116

2028 23,98,806 23,98,806

2029 25,90,710 60,00,000 85,90,710

2030 27,97,967 27,97,967

2031 30,21,804 30,21,804

2032 32,63,548 25,00,000 57,63,548

2033 35,24,632 35,24,632

2034 38,06,603 30,00,000 68,06,603

₹ 3,68,70,653.93
CAPITAL NEEDED FAMILY KEEPS WITHDRAWING
DEPOSITED AS SCHEDULED
 WARREN BUFFET
ASKED TO STUDENTS
ONE TIME SETTLEMENT OF 10% OF ALL YOUR FUTURE INCOME?
 CREATOR’S ECONOMIC VALUE

NET WORTH
OF
CREATIONS

INCOME

EXPENSES

25 35 45 55 65
The creator’s value is many
times more than the value
of his creations so far.

SO THE CAPACITY TO CREATE IS TO BE INSURED

 On an average 1000 fruits per yield.
Farmer earns ₹10 per fruit.
For the last 20 years the farmer
and his family have enjoyed
the yield from this tree.
Government orders take over of
the tree for its use.
You are the adjudicator for this case.
How much compensation would you order,
that the Government pay the farmer
for this tree?
If you come to know, that the farmer is left with 3 more
trees in his garden even after losing this tree, then will you
change the compensation amount to be given for this tree?
A new Mercedes lost, was replaced with a Maruti-800
by the Insurance company, for that is what it was
insured for.

It is not what you can do with or without it;

It is what it is worth

It is therefore not what they would need,

but what they have lost
 WHATEVER ASSETS WE HAVE
EARNED OR INHERITED TILL NOW

OWNERSHIP CAN BE TRANSFERRED

TO OUR BELOVED

CAN BE OWNED AND USED

TILL WE LIVE BUT
OWNERSHIP CAN NOT BE TRANSFERRED

gopinathr@go-past.com
HOUSE LAND

BUSINESS
CASH

JEWELS

CAR STOCKS
 TALENTS BRAND

INTELLECT
? EXPERIENCE

gopinathr@go-past.com
BASED ON THE VALUE THESE ENDOWMENTS
HAVE CREATED FOR YOU AND YOUR FAMILY
IN THE PRESENT TIMES,
WE CAN MAKE A
PROJECTION OF THE VALUE
LIKELY TO BE GENERATED IN FUTURE

gopinathr@go-past.com
HUMAN LIFE VALUE
(SIMPLE)
 HLV (SIMPLE)

• Monthly income= ₹ 5,00,000.00

• Spent on self = ₹ 1,00,000.00

• To the family = ₹ 4,00,000.00

 HUMAN LIFE VALUE
• BALANCE EARNING
SPAN IS 15 YEARS

• @4,00,000/P.M.
FUTURE EARNINGS
WILL BE
₹7,20,00,000/-

gopinathr@go-past.com
Name:

K PRESENT AGE

L AGE AT WHICH WISH TO RETIRE

M BALANCE EARNING SPAN (L-K)

N PRESENT YEARLY INCOME

P AMOUNT SPENT ONLY ON SELF

Q CONTRIBUTION TO THE FAMILY (N-P)

HLV M*Q=
YEAR CONTRIBUTION
2019 4800000
2020 5280000
2021 5808000
2022 6388800
2023 7027680
2024 7730448
2025
ar s 8503493
2026
ye 9353842
2027
2028
15 10289226
11318149
2029 12449964
2030 13694960
2031 15064456
2032 16570902
2033 18227992
HLV 76042280
 HUMAN LIFE VALUE
(CONSIDERING FUTURE
RISE IN INCOME)
 PLEASE ESTIMATE HLV
• MR ARVIND IS 48 YEARS NOW, AS AN ARCHITECT HE HAS DESIGNED SOME
OF THE FINEST BUILDINGS IN THE CITY.

• HE HAS WON 12 AWARDS SO FAR FOR SOME OF HIS DESIGNS. HE HAD

STARTED HIS OWN FIRM IN PARTNERSHIP WITH TWO OTHER PERSONS
WHOSE ROLES ARE PRIMARILY AS AN INVESTORS IN 2001.

• THERE ARE 45 PEOPLE WORKING IN THIS FIRM NOW.

• THE PY NET INCOME OF MR ARVIND WAS ₹2.8C

• MR ARVIND HAS 2 SONS OF AGE 18 AND 16.

• HIS WIFE IS FULLY ENGAGED IN TAKING CARE OF THE FAMILY’S DOMESTIC

NEEDS AND PROVIDING TUITION FOR THEIR CHILDREN.

• THE FIRM IS NOW NEGOTIATING SOME BIG ORDERS INTERNATIONALLY

AND IT IS ESTIMATED THAT THE FIRM WILL GROW AT 15% PA ON AN
AVERAGE FOR THE NEXT 5 YEARS.
 You have already invested on yourself, in the
past over a period of time, for your future.
The current value of that investment is equal to
the present value of your future.
PROF SOLOMON. S. HUEBNER
1882-1964
HUMAN LIFE VALUE
CAPITALISED VALUE OF
THAT PART OF THE
INCOME (OR CAPACITY)
DEVOTED FOR
DEPENDENTS
-”LIFE INSURANCE”-PROF S S HUEBNER

gopinathr@go-past.com
 Maintenance Fees vs Profits
• A CNC machine was installed in the workshop 10
years before. It has given a net profit of almost 1C
every year.
• The cost of the machine has been already
recovered in the first 6 years of the machine
• It needs a maintenance fees of 50,000 every year.
• If well maintained it has the capacity of producing
the same or more profits for the next 25 years.

gopinathr@go-past.com
 Buy back offer
• The company sold a highly sophisticated machine to a client. It is so
sophisticated that it can not be repaired, it has to be only discarded
in that event.
• The normal working capacity of this machine is 35 years. The
company has sold quite a number of these machines and in their
experience rarely there has been any break downs so far.
• A special offer on buy-back was also offered that if the machine
breaks down before the end of 35 years from the dop, then they will
reimburse the full price of the machine.
• This offer is for a very limited period and comes at a cost of 0.75% of
its value, per annum.
• 35*0.0075= ?
NET-WORTH
 FINANCE
&
ACCOUNTS
 A.Y. 2019-2020

PROFIT & LOSS A/C ₹

ANNUAL SALARY + DISTRIBUTED PROFITS 103L

ANNUAL EXPENSES AND TAXES 79L

NET PROFITS 24L

 LIABILITIES ₹L ASSETS ₹L type

EDUCATION 50 RETIREMENT FUND 40 i

MARRIAGE 100 EQUITIES 70 i

SETTLING DOWN 100 PROPERTY 50 pa

EMERGENCY 10 SUNDRY ASSETS 20 pa

LOANS 25 DEBT INSTRUMENTS 15 i

SPOUSE PENSION 100 CASH/BANK 5 c

TOTAL 385 200

NET WORTH -185

 ₹200 L
₹385 L
ASSETS

LIABILITIES
 LIABILITIES ₹L ASSETS ₹L type

EDUCATION 50 RETIREMENT FUND 40 i

MARRIAGE 100 EQUITIES 70 i

SETTLING DOWN 100 PROPERTY 50 pa

EMERGENCY 10 SUNDRY ASSETS 20 pa

LOANS 25 DEBT INSTRUMENTS 15 i

SPOUSE PENSION 100 CASH/BANK 5 c

LIFE INSURANCE 185 i

TOTAL 385 385

 ₹385 L ₹385 L

LIABILITIES ASSETS
 LIABILITIES ₹L ASSETS ₹L type
EDUCATION 50 RETIREMENT FUND 40 i

MARRIAGE 100 EQUITIES 70 i

SETTLING DOWN 100 PROPERTY 50 pa

EMERGENCY 10 SUNDRY ASSETS 20 pa

LOANS 25 DEBT INSTRUMENTS 15 i

SPOUSE PENSION 100 CASH/BANK 5 c

LIFE INSURANCE 185 i

LIFE INSURANCE 70 i

TOTAL 385 385

 ₹385 L
₹385 L
LIABILITIES

ASSETS
 2019-2020

PROFIT & LOSS A/C ₹

A TOTAL COMMISSION + OTHER INCOME 300L
B BUSINESS RELATED EXPENSES 152L
C GROSS PROFITS (A-B) 148L
D TAXES 45L
E NET PROFIT (C-D) 103L
F EXPENSES RELATED TO FAMILY 79L
G NET PROFIT OVERALL (E-F) 24L
 DEBTS AMOUNT

1 Housing

2 Vehicles

3 Business

4 Education

5 Personal/appliances

6 Credit cards

7 Guarantor/Surety

8 Any other item left out in the above list

Total