The vast majority of Americans don’t know as much about their insurance coverage as they think, according to a recent survey.

The state Department of Commerce and Insurance (TDCI) is urging Tennesseans to educate themselves.

“Now more than ever, consumers need to be mindful of the impact their insurance decisions can have on their financial future,” said state Commerce and Insurance Commissioner Leslie Newman, in a news release.

“By arming themselves with the facts — and improving their ‘Insurance IQ’ — Tennesseans can make sure they are adequately protected, without paying more than they should for that coverage,” Newman said.

The National Association of Insurance Commissioners-sponsored survey found that Americans flunked a 10-question Insurance IQ quiz with, on average, only four correct answers — an “F” by most U.S. grading standards. The 1,000 Americans surveyed answered such questions as: Does auto insurance automatically cover a rental car? Can you own a house without homeowners insurance? In general, how much life insurance is recommended in relation to your annual salary?
This apparent lack of knowledge contrasts sharply with confidence levels expressed by the survey respondents. Before taking the quiz, nearly 60 percent said they felt “very confident” when making insurance decisions overall, with only 15 percent voicing any insecurity about their decision-making abilities.

Newman said the following tips will help Tennesseans better understand their insurance policies:

• Get savvy. Before shopping for a policy, learn as much as you can about insurance.
• Shop around; do your homework. After learning the insurance basics, get premium quotes from several companies for the amount of coverage you require.
• Before committing: Stop. Call. Confirm. If you are unsure about an insurer or agent you are working with, stop before signing any paperwork or writing a check. Call the Tennessee Insurance Division at 1-800-342-4029 and confirm the company or agent is licensed to do business in the state.
• Review your policy. Do not wait until you need to file a claim before evaluating the scope of your coverage. By understanding your policies, you can be prepared for any situation and, potentially, save money by avoiding unnecessary costs.
Among the key findings of the survey:
• Health: Fewer than half of those surveyed (49 percent) know that if they leave their job and choose the federal Consolidated Budget Reconciliation Act (COBRA) to continue their health benefits, they must pay the full cost of coverage. However, 58 percent are aware that health insurance will not cover their living expenses if they became disabled and cannot perform their job.
• Home: Just one in five respondents (19 percent) realizes that the requirement for private mortgage insurance (PMI) on a newly purchased home depends on the size of the down payment and lender; almost 30 percent think PMI is required by law. Less than 50 percent of people surveyed realize they can legally own a home without homeowners insurance (although lenders will not allow it).
• Life: Only 14 percent of respondents correctly know that the amount of life insurance typically recommended for individuals is 5-7 times your annual salary; 29 percent believe 2-4 times an annual salary is the recommended amount; and nearly 40 percent simply say they have no idea. (This is a common benchmark; however, the NAIC encourages individuals to carefully consider their own needs.)
• Auto: Fewer than two-thirds of Americans (62 percent) are aware of the top three factors that impact the cost of auto insurance coverage (i.e., accident history, vehicle safety features, geography). And, only four in 10 respondents (41 percent) know that auto insurance does not automatically cover a rental car.