Final answer:
The estimate of financial loss due to a person's death based on future earnings is called Human Life Value. It's used by economists and insurance professionals to assess the economic impact on dependents, and by agencies like the EPA for policy-making. Cash-value life insurance policies are directly tied to the human life value as they provide a death benefit to beneficiaries.The correct answer is option D.
Step-by-step explanation:
The concept you are referring to in your question is known as the Human Life Value, which is an estimate of the financial loss caused by a person's death, based on the present value of their future earnings.
Economists and insurance professionals often calculate this value when assessing the economic impact of an individual's death on their dependents or beneficiaries. Such calculations involve a variety of factors including the person's income, potential future earnings, and the financial needs of their dependents.
The Center for Environmental Economics (NCEE) puts forth a statistical value for a human life, which can influence policies such as those related to environmental protections.
For example, the U.S. Environmental Protection Agency (EPA) considers the value of human life when estimating the benefits of reducing pollution. In 2006, NCEE valued a statistical human life at $7.4 million, adjusted for inflation to over $10.5 million in 2022 dollars.
Different jobs carry different levels of risk, which is often reflected in the compensation offered. High-risk jobs, such as ocean fishery or ice trucking in Alaska, typically offer higher pay to compensate workers for the increased danger compared to fish farming or truck driving in less hazardous conditions.
Cash-value (whole) life insurance is relevant to this discussion because it combines a death benefit with an accumulated cash value that policyholders can use during their lifetime.
The death benefit in a life insurance policy is fundamentally tied to the human life value concept, offering financial protection to beneficiaries in the event of the policyholder's untimely death.The correct answer is option D.