Consumers Need Brush Up on Their Insurance Knowledge

With new health insurance legislation enacted, and given the fact that there are a number of different insurance coverages on the market, it should not come as a surprise that many consumers have some studying to do when it comes to basic insurance knowledge.

According to a survey from the National Association of Insurance Commissioners (NAIC) only 45 percent of Americans note being confident regarding making insurance choices and more than 60 percent were unable to answer basic questions regarding insurance coverage.

Those questions included:

  • Does auto insurance cover personal property stolen from your car?
  • At what age do most people become eligible for Medicare?
  • Can credit scores affect your auto insurance premium?

The answers no, 65 years of age and yes—escaped most of the 1,000 American adults who undertook the survey, which was comprised of a pair of sections—one section gauging broader consumer perceptions on insurance and another 10-question IQ component that tested specific knowledge.

As it turns out, the majority of respondents were only able to answer four out of 10 questions correctly on the IQ component.

The survey also pointed out that a whopping 86 percent of respondents said they do not understand all of the terms being used in the current discussion on health care reform.

Other important findings related to knowledge of health care and insurance coverage include:

  • More than half (55 percent) of all Americans do not comprehend what a pre-existing condition is, which is critical when choosing health care coverage. A pre-existing condition is any health problem that existed prior to someone applying for a health insurance policy or enrolled in a new health plan.
  • Forty percent could not name the age (65 years of age) at which the majority of individuals become eligible for Medicare.
  • More than half of Americans (53 percent) believe they can only make changes to their group health insurance coverage within the open enrollment period provided by their employer, and 16 percent noted they have no idea when changes can take place. In actuality, certain exceptions apply for new employees or employees with life-changing events like pregnancies or marriage.

The NAIC survey also reports that a number of the basics of auto insurance are not well understood, even though it is one of most commonly purchased types of coverage by people of all ages and demographics. The survey reports that:

  • More than six in 10 Americans (63 percent) do not understand that if property gets swiped from their car, it is covered by their homeowners/renters policy—and not auto insurance.
  • More than half (54 percent) do not realize that, depending on the state in which you reside, your credit history can be one of the factors looked at by insurance companies when deciding your premium.
  • Eighty-six percent of Americans do not know that when their liability coverage is 100/300/100, the last number represents the maximum amount that their insurer will pay in property damage for an accident.

While consumers are not expected to know every single detail regarding insurance, having the basics down is definitely to their advantage.