Did you know that there are many types of insurance scams out there to be aware of?
Here we define for you some common insurance scams, so that we can learn together. Let’s get our scam smarts on! And hopefully we can keep ourselves from flunking out and becoming a victim of one of these common insurance crimes.
Any questions? Just ask one of our friendly teachers (aka: Asurea Agents). Welcome to scam school!
Lesson Plan for today: Spot the 9 Scams
SCAM 1: Creating a fake insurance company: This is when an agent makes fake documents and invents an insurance company that doesn’t exist. Then the agent keeps all your monthly payments (premiums) that is sent to that fake ‘company.’
- TIP: Bills should always be coming from your life insurance or mortgage protection life insurance company and not directly to the agent. If the agent is sending you bills, that is a warning sign. You can also call the insurance company to see if you are actually enrolled. Make sure to look up the company’s contact information online or in your phone book. An unscrupulous agent may have given you a false number.
SCAM 2: Selling fake insurance plans: This is when an insurance agent creates fake life insurance or mortgage protection life insurance plans for you to purchase and then keeps the money for themselves.
- TIP: Be wary of anyone who says this offer is only valid for today. Oftentimes, scammers need to close deals fast because they are worried they will be caught soon, so they need to make the sale now and not later.
SCAM 3: Stealing your premiums: This is when an agent pockets your monthly payments instead of forwarding them to the insurance provider. The insurance life insurance or mortgage protection life insurance policy they sold you is real, but the insurance company doesn’t get your monthly payments. You might have your policy cancelled, leaving you uninsured.
- TIP: One way to avoid this is to always make your monthly payments online or with EFT. Never make your payment directly to your agent or the agent’s agency. Asurea is an agency, not an insurance company, so you would never make a payment to us. If an agent tells you to do so, do not trust them.
SCAM 4: Selling coverage you don’t want or need: This is when an agent convinces you to buy more insurance than you want or need. It’s often expensive and unnecessary, but lucrative in commissions for the agent. There are actually ethical rules about this, and a good agent will never sell you more life insurance or mortgage protection life insurance than you need. If you feel you are being pushed into buying too much insurance, run!
- TIP: A responsible agent will go over your finances with you before suggesting a plan to make sure you are buying the right amount, and they should never push you into buying more than you logically need.
SCAM 5: Bait and switch: This is a form of fraud where you think you are buying one product, but are actually sold another.
- TIP: When you speak with a representative over the phone, it is very unlikely they will be able to give you an accurate quote. Your agent will need to meet with you, discuss your specific needs and go over what products are available before they can pair you with the right plan. A good agent will never rattle off a cheap quote before learning more about you and your needs.
SCAM 6: Churning: This is an illegal practice where insurance agents unnecessarily replace existing life insurance or mortgage protection life insurance policies just for the purpose of earning additional commissions. Don’t feel like you need to upgrade or change your current policy unless there is a good reason. Some excellent reasons to replace your existing life insurance or mortgage protection life insurance policy is if your insurance needs have changed, if your health has significantly improved, if you would like to add a rider to your policy or if you would like to change your policy from a Term Life Insurance policy to a Permanent Life Insurance policy.
- TIP: Make sure you know why you are replacing your current policy – not just because the agent says you should.
SCAM 7: Twisting: An agent may encourage you to switch policies too early by ‘twisting’ the truth about the downsides of the new policy. For example, if you are sick, have an injury or have some other medical condition, will that ‘affordable’ new policy refuse to cover you because your medical condition counts as a pre-existing condition? This type of scam often involves you changing from one insurance company to a different insurance company and almost always makes promises it can’t keep.
- TIP: Does the new policy sound too good to be true? It probably is.
SCAM 8: Sliding: An agent or insurer slips you extra coverage you didn’t ask for, but do have to pay for. This can easily add $100, $200 or more to your monthly payments! The agent cheerfully says it’s simply part of a package or doesn’t even tell you anything about the coverage. Your agent may suggest you add what are call riders to your new policy. And they can be great if you want them. But your agent should not be adding riders onto your policy without you knowing. Make sure you know what you are buying! This is where reading the fine print pays off.
- TIP: Never sign a blank insurance form for the agent to fill out later for you!
SCAM 9: Stranger-owned life insurance scam: This is when you let a person buy life insurance for you with their name as the beneficiary, but they are not a family member or someone you would normally want to provide for after you pass away. Many times, the victims of this type of scam are the elderly, and this practice is actually illegal in most states.
- TIP: Make sure both you and your spouse (or adult child, relative, etc.) meet with your agent while you make your purchase decision. They may think of more questions to ask and can help you decide whether the purchase makes sense. Life insurance is purchased to protect your family, not strangers.
So, how did you do? Did you learn about the insurance scams out there and how important it is to keep your eyes and your pencil sharp from these common scam types? We work hard to keep on top of all the scammers out there in order to help you protect yourself.
You may also be interested in:
The Top 4 Things You Must do After Buying Life Insurance
Always be Truthful When Applying for Life Insurance
Asurea offers Life Insurance, Mortgage Protection Life Insurance, Medicare Supplement Insurance, Final Expense Insurance, Disability Insurance, Long-term Care Insurance, Retirement Planning products and more. For additional information, click on the ‘Learn more’ button below. Want to have articles just like this delivered to your inbox? Just enter your email address in the box below and click ‘Subscribe.’
This information is provided for general consumer educational purposes only and is not intended to provide legal, tax or investment advice.