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What’s your insurance IQ?

By Jay MacDonald ·
Thursday, May 13, 2010
Posted: 2 pm ET

What is your insurance IQ? Here's a pop quiz to test your knowledge:

1) Does your auto insurance or your homeowners/renters insurance cover personal property stolen from your vehicle?

2) At what age do most of us become eligible for Medicare?

3) Can you only make changes to your group health insurance coverage during the open enrollment period provided by your employer?

If you're a little uncertain of the answers, you're not alone.

In a recent survey by the National Association of Insurance Commissioners (NAIC), only four in 10 Americans polled were able to correctly answer basic questions like these about their health and auto insurance. The answers to the above questions: 1) homeowners/renters insurance, 2) age 65, and 3) no.

The above Medicare question baffled 40 percent of respondents. As for the open enrollment question, more than half (53 percent) were under the impression that they could only make changes to their health insurance coverage during open enrollment periods, and 16 percent admitted they didn't have a clue.

Even more unsettling, 86 percent of those polled said they were a little shaky on the terms used in the health insurance debate. For example, fewer than half (45 percent) understood the term "pre-existing condition," even though it is a central issue when shopping for health insurance. (A pre-existing condition is any health problem that existed prior to applying or reapplying for health insurance).

We're not much better at mastering the basics of car insurance. Six in 10 respondents (63 percent) flunked question 1 above.

It's not like we're in denial about our lack of insurance knowledge. Among the study group, less than half (45 percent) said they feel confident making insurance decisions. Which means the rest of us are unusually trusting, feeling lucky or living on a river called denial.

You can take NAIC's 10-question Insurance Intelligence Quiz here.

The NAIC acknowledges that most of us depend on our insurance agent or human resources department for guidance in our auto, health and life insurance policies.

But given the complexities and costs associated with insurance coverage today, a smart consumer will bone up on insurance basics and the associated terminology in order to speak the same language as our advisers.

After all, it's our risk we're dealing with here.

Bankrate walks you through the mechanics of life, auto, homeowners and health insurance in its Insurance Basics., a Bankrate company, offers both a comprehensive tutorial on auto, health, home, life and long-term care insurance and an extensive glossary of insurance terms.

In light of the many changes ahead as a result of the Patient Protection and Affordable Care Act, there's never been a better time to become hands-on about those dense, complicated, and yes, perplexing cornerstones of your personal finances: your insurance.

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Nathan Ackerman
May 17, 2010 at 11:43 am

Great article. It's a bit disconcerting that so few Americans know basic insurance information. During the recent healthcare reform, it was very apparent that most people had no idea what changes would occur, or how those changes would affect their existing coverage. Without educating ourselves, Americans will never see the changes they want - and need. Granted, insurance companies purposefully make policy information difficult to understand, but help is out there for anyone who needs it.