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The human life value approach is a way of calculating how much life insurance you should get.

But it’s about far more than numbers and calculations. It’s also about much more than the life insurance your beneficiaries get when you die.

The human life value approach is about maximizing your productivity and contribution both while you’re alive and after you die.

what we're worth book michael isom

I explain the human life value approach in detail in my book, What We’re Worth: Realize Your Human Life Value and Know What You’re Really Worth.

Get your FREE hardcover copy now to learn more.

Producers vs. Consumers

To truly understand the human life value approach, one first has to understand the difference between Producers and Consumers.

Simply put, Producers are those who produce more value than they consume in the world. Consumers, on the other hand, consume more value than they produce.

The Producer Paradigm is a mindset where we are focused on creating maximum value in the world. In this mindset, we see people as the true assets, not material things. We live from an abundance mindset.

In the Producer Paradigm, we love people and use material things to serve others.

The Consumer Condition is the opposite. It’s a mindset where we’re focused on taking as much value as we can, while giving as little value as possible. We operate from a scarcity mindset.

In the Consumer Condition, we love material things and use people.

Why Do Producers Take the Human Life Value Approach to Life Insurance?

Les McGuire is a former business partner of mine who died in a tragic airplane accident in 2006. Les once wrote,

“Producers are committed to creating maximum value in all situations, regardless of circumstance. Consumers think that risk means losing money; Producers know that risk refers to lost production, whether created in the past or yet to be created in the future. Producers reduce both risks to near zero.”

Producers mitigate the risk of lost production in many ways. But at the top of the list is by using insurance.

People’s attitudes toward insurance can be categorized as follows:

  1. Those who hate insurance and don’t buy it when they can avoid it.
  2. Those who hate it but buy the minimum amounts begrudgingly.
  3. Those who like insurance but fail to use it properly and completely.
  4. Those who understand it, love it, and use it accordingly.

Remember these four categories because we will refer back to them in future articles.

The Truth About Insurance Expenses

The truth is that nobody hates insurance—they just hate paying for it.

People in the Consumer Condition see insurance as a necessary evil at best. They don’t understand the human life value approach. They fail to see the benefits it provides. This is why you’ll often hear Consumers talk about being “insurance poor.”

But what if we could buy insurance the day after a catastrophic event happened? How much insurance would we buy then?

The answer is obviously, “As much as we could get!”

Yet many people get the minimum required amounts in order to save money on premiums.

Producers understand that the best way to reduce their insurance expenses is to buy as much of it as possible.

We can either retain risk or transfer it. What happens when we retain risk in the name of reducing insurance expenses? Ironically, we end up paying much more than the wise Producers who transfer their risk.

Consider the following example: Two families live on the same street. Their homes, ages, income, and assets are all the same. The only difference is that Family A has their home paid off and carries no homeowner’s insurance. Family B has a mortgage and carries homeowner’s insurance.

Both homes burn down at the same time. What has happened to the net worth of both families?

Family B indemnified the loss through insurance, so their net worth is unaffected.

Family A, on the other hand, must use assets out of their own pocket to replace the damage.

The net worth of Family A has been reduced dramatically. Their expenses have also increased dramatically because of their failure to use insurance. Family A paid less in premiums. Yet in the long run, they paid more than Family B. This because they retained, rather than transferred, their risk.

Producers love insurance because it transfers their risks. They know that, using the human life value approach, it saves them money in the long run.

The Human Life Value Approach Protects Your Mindset

Assume that you live your entire life paying the maximum amount of insurance premiums. You never experience any loss (your eventual death set aside for the moment). Therefore, your insurance never pays a claim.

In the example given, are all of your premiums paid just dollars lost?

In the Consumer Condition, we don’t understand that insurance coverage is primarily paradigm insurance.

How much peace of mind can you have when you drive a car with no insurance? Will not your fear of loss be a constant companion, preventing you from thinking productively?

Suppose you cancel your home insurance and are constantly worried about losing your home. (And if you’re not worried, you should be!) You’re taking time away from thinking about the things that really matter.

In the human life value approach, insurance goes much deeper than Consumers realize. It is not just dollars lost if you pay into a policy and never receive money through a claim. It enables you to free your mind, stay in the Producer Paradigm, and eliminate the fear of loss.

Every moment you spend worrying about loss is a moment that you are not thinking productively. You can never recapture those lost moments. Producers eliminate the fear of loss by getting the maximum amount of insurance coverage they can get.

What Insurance Really Protects in the Human Life Value Approach

We often view insurance as a tool to protect property value. But in the human life value approach, it is to protect your human life value.

Human life value is a term used in the life insurance industry. It refers to the economic worth of an individual based on their potential income. It also accounts for the financial impact their absence would have on their dependents.

Human life value is the source and creator of all property value. Your home is worthless without people to value it. If your home burns down, it doesn’t represent a loss of wood and brick. Countless people expended thought, time, labor, and energy to produce your home. If it burns down, all that human production is lost or consumed.

We can’t get rid of the risk of fire. But we can indemnify or mitigate the risk of loss of production through insurance.

Producers don’t insure houses and cars because the houses and cars have value. They insure their human life value as it relates to their ability to produce value with material things.

Realize that every material thing is nothing but a representation of human life value. When material things are destroyed or consumed, it represents a loss of human life value.

This is why Producers take the human life value approach to life insurance. They carry the maximum amount of life insurance to protect against the risk of lost production.

Price vs. Cost

Certain types of insurance may be used to leverage into other investments. But what most people fail to consider is that insurance allows you to invest. This is true even if you never use the actual insurance as a specific investment tool.

For example, if a person owns a $1 million home and has no homeowner’s insurance. He also has $1 million in cash. Where can he invest his cash in such a way as to keep his home protected?

The safest place to put it is in a bank account, because he will constantly have the fear of loss. No one who understands risk will expose principal to loss if they are not properly protected.

So this person may be saving $2,000 per year on the price of insurance premiums. But at what cost? If he simply had insurance, he could invest without the fear of lost principal constantly haunting him.

Let’s assume he could get just 10% per year on that money in an investment vehicle other than a bank account. Over just a ten-year period, the lost opportunity cost is $100,000. So in that ten years he “saved” $20,000 in insurance premiums. Yet he actually suffered $80,000 in lost opportunity cost.

The Human Life Value Approach and the Producer Paradigm

Producers love insurance and they use the human life value approach. They focus less on the price of premiums and more on the cost of not being properly protected.

Producers ensure that their human life value is able to produce value in any situation that they can control. With insurance, they can continue creating value even if they are sick, disabled, or dead.

Producers use insurance as a way to constantly keep themselves in a productive paradigm. They use the human life value approach to manage their fear of loss.

Producers understand that the first step of being a wise steward is ensuring that their current stewardships are protected before they concern themselves with increasing their stewardships.

The creed of the Producer is to find ways to produce value in any given situation. This is why Producers love insurance. And this is why they use the human life value approach to life insurance.

How We Apply the Human Life Value Approach with the AIS Triangle

Our core philosophy of wealth planning is based in the human life value approach. It is comprised of the three points of the AIS triangle: Asset, Investment, Strategy.

Your #1 ASSET is You

Your primary asset isn’t your business or any investment—it’s YOU. This is the first asset we prioritize for both protection and growth.

Your human life value is not just your future economic worth. It also encompasses your knowledge, character, values, mindset, and skills applied productively to create value for others.

To build greater wealth, start by enhancing your human life value by investing in yourself.

Start now by claiming your free hardcover copy of What We’re Worth: Realize Your Human Life Value and Know What You’re Really Worth.

Your #1 INVESTMENT is Your Business

If you’re an entrepreneur, your business is the main source of your cash flow and wealth. This is where you maintain control rather than relinquishing it. It’s where your expertise, knowledge, and passion reside. It’s also where you have the most opportunities.

If you take any risk, take it here and nowhere else. Your top investment is your business or career—not stocks or real estate.

Before seeking external investments, we first help you optimize your business cash flow and wealth.

Your #1 STRATEGY is Guaranteed, Protected, and Liquid

For the wealthy, the ideal financial strategy is to store extra cash in places that are guaranteed, protected, and liquid. The wealthy do not gamble or speculate.

Having guarantees on your money safeguards your mindset and your ability to continue producing at the highest level.

Our core strategy is to minimize risk and provide safety and control. This involves using products that are guaranteed, protected, and liquid. This includes properly structured, optimally funded whole life insurance.

This is akin to locking your money in a vault. You still have access to it for other investments. But the certainty and control it offers lay the foundation for your wealth.