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.