InsuranceThought — Blogs About Insurance

Knowledge is Power When It Comes to Buying Insurance

When you’re shopping for insurance, it’s important to know as much as possible in order to compare quotes and find the best insurance for the best price based on your specific needs. The National Association of Insurance Commissioners (NAIC) commissioned a survey to find out the extent of Americans’ knowledge on the subject; their findings were not terribly impressive. The average score on the “insurance IQ” quiz, a 10-question portion of the survey, was a mere four. The low scores are in great contrast to the fact that only 15 percent of those taking the survey felt insecure with matters of insurance, while 60 percent had reported feeling “very confident” in their decision-making abilities.

Here is an example of the questions on the NAIC Insurance IQ quiz portion of the survey:

1. Does auto insurance automatically cover a rental car? (no)
2. Can you own a house without homeowners insurance? (yes)
3. In general, how much life insurance is recommended in relation to your annual salary? (5 – 7 times your annual salary)

The majority of American adults could not answer these questions correctly; if you knew the answers, you are among the few who did!

To take the entire quiz, go to: http://www.insureuonline.org/iiQ_final.htm

The NAIC survey revealed that only 62 percent of Americans knew that accident history, vehicle safety features, and geography are key factors in determining the cost of auto insurance. A mere 19 percent knew that the requirement for private mortgage insurance is based on the size of the down payment and the lender. Just under 40 percent of those taking the survey had any idea of how much life insurance to carry based on a yearly income multiplier. And fewer than 50 percent knew that when choosing COBRA health insurance after losing a job they must cover the entire cost of coverage.

You really MUST educate yourself about whatever type of insurance you plan to purchase so you can utilize the knowledge to compare quotes from various providers. Before signing a policy, you should confirm that the provider or agent is licensed with your state insurance department. Once you’ve decided on which insurance is best for you, be sure to review the policy regularly so you know how well you’re covered should you need to make a claim.