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Test your coverage IQ

Posted June 12, 2013 in Advice Column

Only 45 percent of Americans feel confident enough to make insurance decisions, according to the National Association of Insurance Commissioners (NAIC).

Where do you stand? There’s no time like the present to enhance your insurance literacy. The more you know, the better able you are to protect yourself, your family and your largest investments. Test your knowledge and learn more with this short quiz:

True or false?
1. Your homeowners coverage should equal the estimated replacement cost of your home, not the purchase price​
2. Your homeowners insurance policy covers flood damage.
3. A solution for people who want extra levels of liability insurance protection above the limits provided by their auto and homeowners policies is called an overflow policy.
4. Your address may impact your auto insurance rate.
5. Your life insurance policy should cover 10 times your yearly income.

1. True. It’s up to you to choose the coverages and limits that meet your needs, but it’s best to insure your home for at least 100 percent of its estimated replacement cost — the cost of repairing or replacing your home to restore its original condition. Estimated replacement cost is different from market value or purchase price. If you select a coverage amount lower than the estimated replacement cost, certain coverages may be unavailable to you.

2. False. Homeowners policies typically exclude flood coverage. Adding coverage may be worth looking into, no matter where you live. According to the National Flood Insurance Program (NFIP), more than 20 percent of all flood claims happen in moderate- to low-risk areas.

3. False. a personal liability umbrella policy layers on top of your existing existing underlying policies to provide extra protection when home and auto liability limits are exhausted. Your agent can help explain how a personal liability umbrella can help ensure that your family and financial health are protected in the event of an accident or lawsuit.

4. True. People who live in densely populated areas — noted for higher occurrences of accidents and theft — will likely pay more for auto insurance than those who live in rural areas, where accidents and theft are less prevalent. Other factors that may influence the cost of auto insurance: vehicle type, coverage, and driving record.

5. False. There is no “one-size-fits-all” formula for selecting life insurance coverage — it’s a personal matter.

Establishing an open dialogue with your agent is the best way to answer any questions you may have.

Because insurance protection is a contract, any coverage descriptions in this article are general only and are not statements of contract. All coverage are subject to all policy provisions, including applicable endorsements.

Information provided by Mitch Lunn, State Farm Insurance, 616 N 15th St. Fort Dodge, 576-4171.

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