Americans lack basic knowledge about insurance that might help their finances during the recession, according to a survey.
We know a lot less than we think we know, according to the National Association of Insurance Commissioners, which sponsored the poll. That disconnect can end up costing people money or leaving gaps in their long-term insurance protection, says the group, which represents state regulators.
"Now more than ever, consumers need to be mindful of the impact their insurance decisions can have on their financial future," said Terri Vaughan, the group's chief executive.
Survey respondents, on average, flunked the group's 10-question insurance quiz with only a 40 percent score.
Among the poll's findings, which covered several areas of insurance:
Auto: Just 41 percent knew auto insurance does not automatically cover a rental car. Health: Forty-nine percent were informed about the cost of coverage if they leave their job and choose COBRA (Consolidated Budget Reconciliation Act) insurance to continue their health benefits. And just 58 percent were aware that health insurance will not cover their living expenses if they become disabled and cannot perform their job. Home: Only 19 percent knew that the requirement for private mortgage insurance on a newly purchased home depends on the size of the down payment and lender; almost 30 percent think PMI is required by law. Fewer than 50 percent realize they can legally own a home without homeowners insurance (although lenders will not allow it). Life: Only 14 percent knew that the amount of life insurance typically recommended for individuals is five to seven times annual salary.Before taking the quiz, nearly 60 percent of respondents said they felt "very confident" when making insurance decisions, with only 15 percent voicing any insecurity.
The nationwide survey was conducted Dec. 4-14. Results were based on phone interviews with 1,000 adults and carry a margin of error of plus or minus 3 percentage points.
The sponsors recommend the following basic tips to help Americans better understand insurance:
Educate yourself. Learn as much as you can before shopping for a policy. The association's website, www.insureUonline.org, is one resource. Shop around. Get quotes from several companies for the amount of coverage you require. Check qualifications. Call your state insurance department if you are unsure about an insurer or agent to make sure they are licensed in your state. Review your policy. Periodically evaluate the scope of your coverage; don't wait until you need to file a claim.Dave Carpenter is an Associated Press personal finance writer. 
© Copyright 2009 Globe Newspaper Company.
