The article discusses the concept of human life value and its application with the help of a case study. The human life value concept means that a person should buy insurance on his life, so that in the event of his unfortunate death, the family, after meeting various financial liabilities are in a position to maintain a resonably good standard of living. With the rise in income level, the younger generation is creating huge liabilities by raising various kinds of loans. They, therefore, must manage these liabilities by buying matching life insurance covers. A transparent and educative approach on the part of the insurers will help people reveal their health conditions and habits, thus reducing adverse selection.

Mohan purchased his first life insurance policy when he was 28 years old for Rs. 10,000 sum assured. Thereafter, Mohan went on adding his life insurance covers and by 1975, he had endowment policies, including one money-back policy, worth Rs. 75,000 on his life. Those were the old days when a cover of Rs. 75,000 appeared quite big. He was then 33.

When Mohan had his blood pressure checked it was found that his diastolic pressure was on the higher side. The doctor told him that he had mild hypertension (high blood pressure). The same year, a life insurance official approached Mohan to buy some more insurance. Though Mohan thought that the existing insurance cover of Rs. 75,000 was sufficient for him, he agreed to buy an additional life insurance policy for Rs. 10,000. However, being an upright person, he made it a point to disclose his history of hypertension in the proposal form as he realized that non-disclosure of this material information could lead to serious implications.

Disclosure of the history of hypertension in the proposal form led to a chain of medical tests. As per the underwriting rules and procedures, he was asked to pay some extra premium on his policy. When he expressed his reluctance to pay the extra premium, he was offered a reduced term of 15 years instead of the 25 years that he had originally proposed without charging any extra premium. He gave his consent to the reduced term and the case was completed. That was the last life insurance policy he purchased. Thereafter, he got scared of proposing for any fresh insurance, as he thought his case might be declined or he might have to pay some extra premium.

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