How Much Life Cover? Replace the Income

A person's future earning power is an economic asset — and like any asset, it can be insured. (Solomon Huebner's idea of "Human Life Value", 1920s.)

In the 1920s, an American professor named Solomon Huebner gave insurance its intellectual backbone with a simple idea: a person's future earning power is an economic asset, as real as a house or a business, and it deserves to be insured like one. He called it the Human Life Value, and it underpins almost every way we size life cover today.

The modern form is the income-replacement method. You estimate the income your dependants would lose if you died, and how many years they would need it replaced, and multiply the two. A person earning S$80,000 a year whose family would need support for fifteen years has, very roughly, a S$1.2 million protection need.

It is deliberately simple, and you refine it from there — adding debts to clear and subtracting savings and existing cover such as the Dependants' Protection Scheme. But the core insight holds: the sum you insure should reflect the income your family would have to replace.

This reframes the question. You are not guessing at a number that "sounds like enough"; you are valuing a real asset — your earning power — and insuring it against loss. It is why a sensible cover figure is usually a multiple of income, not a round number plucked from the air.

Illustrative example: the income-replacement sum

The formula captures it: yearly income, multiplied by the years your family would need it, gives a first estimate of cover. Refine it for debts and existing savings — but start by valuing the income you would be replacing.