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Test your insurance IQ

According to the National Association of Insurance Commissioners (NAIC), 67 percent of Americans feel they've got just about the right amount of insurance. But when asked if they understand the details of their coverage "very well," 62 percent admit they don't.

Based on the dual premise that (a) no one knows everything about insurance and (b) you can never know enough, we've compiled a Bankrate Guide to Insurance to enhance your overall understanding of policies of protection -- auto, health, home and life.

But before you get started, test your insurance IQ by taking this short, fun quiz.

  1. You're thinking of buying a new house and learn the one you like best has had three plumbing leaks in the past five years. Before signing a purchase contract you should . . .

    Not worry about it because the current owner only filed one small claim.
    Give the address of the house to your insurance agent and ask for a price quote.
    Not worry about it because you have a different insurance company than the current owner.
    Have a licensed plumber make a full inspection and report on any potential problems.
  2. Is it true that although I donít live anywhere near a river or ocean, I must buy flood insurance for my new home?

    No, because your regular homeowners insurance will protect you against flooding.
    Yes, because you could have a flood in your house caused by a plumbing leak or overflowing washing machine.
    No, as long as the first floor of your house is at least 3 inches higher than your front walk.
    Yes, if you have a mortgage on your house and it's in a designated flood hazard area.
  3. A neighborhood kid fell out of a tree he was climbing on my property and broke his arm. Will my homeowners insurance pay his medical bills?

    Yes, As long as you had "No Climbing Trees" signs posted prominently on your property.
    No, if he was climbing without your permission it's his parents' fault.
    Yes, most homeowners policies have provisions to cover liabilities like this.
    No, because your insurance company may claim having trees on your property constitutes "an attractive nuisance," and you should have cut them down long ago.
  4. Which of these will not help lower my auto insurance premiums?

    Stop car-pooling with coworkers so, in case of an accident, fewer people would be injured.
    Installing a high-tech anti-theft alarm system.
    Paying all my bills on time.
    Get married.
  5. My antique car was hit from behind by another driver who is fully covered by insurance. His company is willing to pay to have my car repaired but don't they owe me something for the big loss in value now that my never-before-hit classic has been wrecked?

    Sorry, Charlie. No auto insurance policy covers intrinsic loss like that.
    You bet. Every state requires all policies to cover diminished value claims.
    Yes, but only if you have a rider in your policy that covers it.
    You have a valid claim, but collecting on it may be tough.
  6. What is the major difference between term life and whole life insurance?

    Term is insurance you have for a short period of time and whole life means you have to pay for it for your entire life.
    Term is only for people with a terminal disease.
    A whole life policy is a combination of insurance and investment while a term policy is insurance only.
    Whole life is cheaper because you pay it off over a longer period of time.
  7. I had a heart attack several years ago. I'm fully recovered and considering a job change. Will I be able to get health insurance through my new employer?

    No way, Jose. Stick with your current job.
    Yes, thanks to the Health Insurance Portability and Accountability Act.
    Yes, as long as you pass a thorough medical exam.
    Yes, but you will no longer be covered for the pre-existing condition.
  8. I hate the idea of buying life insurance because the only way I can win is to die. Shouldn't there be a life insurance policy that pays big bucks if I live but nothing if I die?

    No, that would make funerals a sad affair indeed.
    Yes, it's called a return of premium term policy and it pays back 100 percent of the premiums paid if you live through the entire term.
    Yes, it's called an annuity. If you pay in for a certain period of time and don't die, you can start collecting paychecks -- sometimes for the rest of your life.
    Both B and C.
  9. Lloyd's of London is famous for issuing insurance policies for the strangest things. Which of these insurance requests did Lloyd's refuse?

    A $1.55 million payout for anyone who could capture the Loch Ness Monster.
    A policy insuring garden gnomes against being kidnapped.
    A policy insuring turn-of-the-century autos from damage from frightened horses.
    A policy covering a grain of rice with the portrait of the Queen of England engraved on it against accidentally being cooked.
  10. The rotten company I worked at for 23 years just fired me, leaving me without health insurance. Should I sign up for COBRA right away?

    Yes, you've got to be enrolled in COBRA within 14 days of termination.
    No. Give yourself a month or so to see if you can land another job. You've got 60 days to sign up for COBRA and more than 90 days to pay for it. If you need to take advantage of it, do so, but it will cost you dearly.
    Yes, especially if you think that slimy company may go out of business or cancel its health plan entirely. In either case your COBRA rights will end abruptly.
    Both B and C.
Insurance Guide
Term life
condo insurance
Offbeat Insurance
Is your pet a 'bad dog'?
Test your insurance IQ
Higher premiums? Blame it on the mold

Handy Tools

Clickable map: Find your state insurance regulator

Understanding insurance lingo
Health insurance terms
How much life insurance do I need?
Term vs. permanent

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