Are Americans Dumb? Study Reveals Most People Don't Know Basic Insurance Information

Published: Thu 08 Apr 2010

An insurance IQ study conducted by the Kansas City office of the National Association of Insurance Commissioners, which polled 1,000 American adults, found most Americans are very uneducated when it comes to insurance coverage. The study discovered that only 45 percent of Americans feel capable of making insurance choices, and that 86 percent do not completely understand insurance terms frequently used in recent discussions on health care reform.

Try to answer the following three insurance questions:

Before you begin, 60 percent of the people questioned in this study failed to answer these questions correctly.

Does car insurance cover personal belongings stolen from your vehicle?

The correct answer is... No. Personal belongings stolen from your car are not typically covered by your insurance company.

Can your credit score affect your car insurance premium?

The correct answer is... Yes, absolutely. Your credit score is actually one of the most important factors used to determine insurance rates.

At what age do most Americans become eligible for Medicare?

The correct answer is... Age 65 is when seniors become eligible to receive Medicare coverage.

Health Care Reform Confusing to Most Americans

That misunderstanding becomes an issue in ways you may not normally expect. Previously this week, the Kansas State Insurance Department mailed out an alert to consumers about con artists trying to sell spurious health care. They especially targeted elderly Kansans, claiming they were hocking "ObamaCare" health insurance policies for the federal government. Should that happen to you, call the consumer hotline at 1-800-432-2484.

One of the baffling health-care-reform terms for study respondents included "preexisting condition," which 55 percent of those polled did not understand. For your information, the term refers to a medical condition one has prior to applying for a medical insurance policy or becoming a member of a new health plan.

Conducted from March 2 to March 12, the study included a section on general consumer perceptions of insurance and a ten-question quiz. On average, respondents answered four out of ten questions correctly.

What Determines Your Auto Insurance Rate?

Car insurance proved vexing for most respondents, including the fact that a policyholder's credit history can affect premiums, and that with 100/300/100 liability coverage, the final number reflects the maximum amount an insurer will pay for property damage in a collision. The NAIC recommended that policyholders try to make more informed decisions about their insurance coverage.

The NAIC also advises comparing quotes from several insurers and researching information on companies from sources like the state departments of insurance. Finally, the NAIC suggests periodically reviewing insurance policies to prepare before disasters arise.