Having high insurance IQ does not refer to how much knowledge you have about insurance in general to qualify you to be an insurance agent. It refers to the level of knowledge you have about your own insurance policies. Statistics show that the majority of people with insurance of all kinds are not well informed about what their policies do and do not cover. Sadly, they find out too late when an accident occurs that they do not have the level of insurance cover that they need.
There are three basic questions you should be able to answer to determine your level of insurance IQ. These are:
1. Does your auto insurance automatically include a rental car if you are involved in an accident and your car has to be put in for repairs or is damaged beyond repair?
2. Can you forego home insurance if you have a mortgage on your property?
3. How much life insurance do you need to adequately provide for your family’s needs after your death?
The correct answers to the above questions are:
3. At least 5 to 7 times your annual salary.
You may feel confident and have peace of mind in knowing that you have insurance, but it is essential that you read the document of the policy in its entirety, including the fine print. There may be exclusions and limitations on the policy of which you are not aware. For example, a typical home insurance policy covers damages that result from flooding that comes from within the home, such as broken water and sewer pipes. However, it does not cover flood damage that originates outside your home. In addition, when the insurance adjuster does an estimate of the damage, if the flood was the result of your inattention to maintaining the home, you may not even receive any compensation because it is your responsibility as a homeowner to make sure you conduct regular maintenance on your home.
When you take out a health insurance policy, you must know how much the insurance company covers when you have to be hospitalized and what portion of the cost of prescription drugs you have to pay. if you travel, you should ask whether this health insurance covers you when you are out of the country or if you will need to buy additional insurance when you travel.
Most people do not even realize that if they are taking out a mortgage with less than a 30% downpayment, they do need to have a homeowners’ insurance policy in place before the final loan documents can be signed. If you own your home without any liens, then it is totally up to you whether you insure it or not.
Before you buy any type of insurance policy, it is important that you become as knowledgeable about this insurance as possible. This will help you purchase the right policy for your needs with the coverage that you need at the time. Ask questions about the coverage and the types of incidents that will or will not be covered. By taking these steps before you buy, you will have high insurance IQ, which will benefit you immensely.