Friday, April 25, 2008

How much life insurance do you need?

I have written about this very subject in the past, but I was reading the magazine Erie insurance sends us and the Q&A section was this very question. The cynical side of me said, why would you ask an insurance agent how much life insurance you need? Insurance agents are not like brokers, they are not held by law to look out for your best interests. That means they can sell you a $10 million policy if you only need $100k. That does not mean they are all that way, but some are and a second opinion is a good idea. Otherwise, its like asking a car salesman how much you should spend on a car or a Realtor how much you can afford to spend on your home. Sure, some may answer the ways we wish they would. I have a friend who is a Realtor who would be helpful and honest. But, that doesn't mean they all will be. Anyway, the Erie insurance agent answering essentially said, talk to me or use the insurance calculator on erieinsurance.com. So, I decided to check out the insurance calculator there, on the right hand column of this page.

I think its interesting what their defaults are, but the calculator is not bad. I think that you need to carefully read each of the sections and make decisions. I wonder if insurance agents actually take you through all of these or assume the defaults? One example is the private school versus public school. The defaults say that your kids are going to private school. In the end, I actually was told that I was over insured right now. Its better than the one I linked to in the past on Smart Money. In my opinion, its also better than the Zander Insurance calculator, Zander being the company Dave Ramsey suggests you purchase term life insurance from. The Zander Insurance calculator, unlike the other two, asks you how much the person being insured makes per year and how many years the surviving spouse will need that money. The other two, in contrast, ask what the surviving spouse's annual living expenses are minus their annual income, which is more accurately what you need to insure for.

Overall, I would recommend the Erie insurance calculator. But, I would recommend that people carefully fill it out themselves instead of letting an salesman, I mean life insurance agent, do it for them.

3 comments:

Catherine said...

Erik- Thanks for the review! I'm glad you checked out the calculator and found it useful. For others who might be looking in to it - please add "www." to the link in the post, or use this link.


We created this life insurance calculator so that you can research your life insurance needs before meeting with an Agent. That way, the Agent's job will be providing you with great customer service that meets your needs – as you’ve defined them. When you are ready to talk to an Agent, Erie Insurance has an easy-to-use Agent locator here.

Happy calculating!
-Cat Amick
Senior Editor at Erie Insurance

Erik said...

Thanks Cat, I appreciate you taking the time to respond and I updated the URL. We use Van Wallace Insurance here in Raleigh, NC and highly recommend them to others. In Pittsburgh, PA, we used Jim Perino who referred me to Van Wallace and I always liked and trusted Jim.

halliwell said...

Thankq,
Life Insurance Needs Calculator computes an estimate of the amount of life insurance you should carry. This form is intended to be used by each parent to calculate their life insurance needs.
Some financial planners advise obtaining enough coverage to eliminate your current debt in addition to providing for the needs of your family.
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Halliwell
http://lifeinsuranceworld.org
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