The Financial Impact of Premature Death: Costs, Losses, and

Summary Premature death means that a family head dies with outstanding unfulfilled financial obligations, such as dependents to support, children to educate, or a mortgage to pay off. At least four costs are associated with premature death: 1.There is the loss of the human life value. 2.Additional expenses may be incurred, such as funeral expenses, uninsured medical bills, and estate settlement costs. 3.Because of insufficient income, some families may experience a reduction in their standard of living. 4.Noneconomic costs are incurred, such as the emotional grief of the surviving dependents and the loss of a role model and guidance for the children. The purchase of life insurance can be economically justified if a person has an earning capacity, and someone is dependent on those earnings for at least part of his or her financial support. The financial impact of premature death varies by family type. Premature death can cause considerable economic insecurity if a family head dies in a single-parent family; in a family with two-income earners with children; or in a traditional, blended, or sandwiched family. In contrast, if a single person without dependents or an income earner in a two- income family without children dies, financial problems for the survivors are less likely to occur. The human life value is defined as the present value of the family's share of the deceased breadwinner's future earnings. This approach crudely measures the economic value of a human life. The needs a