Common Insurance Scams and Traps You Must Avoid
Unfortunately, insurance scams are on the rise. And with insurance policies becoming more complicated for the ordinary layperson to understand, there are many traps into which you could fall. Here is a look at the most common insurance scams and traps you need to avoid.
1. Type of Fraud: Insurance Scams
Insurance fraud in the United States is estimated to cost Americans between $400 and $700 per year in premium costs. The most common types of fraud are false claims, inflated claims, and even faking your own death. But scammers do not just hit insurance companies directly. They can also use you in insurance scams so they can benefit from pay-outs. Two of the most frequent scams involve health insurance and car insurance.
Since the advent of the Affordable Care Act, the process of obtaining the right health coverage can make you feel like you are in a bureaucratic maze. Shady organizations count on that confusion to sell health insurance policies that deliver fewer benefits than promised or none at all. In the worst-case scenario, such policies can be outright fakes.
Beware of untrustworthy websites and cold calls. Instead, find a reputable health insurer from a non-biased source. For example, on this website, you can compare multiple insurance companies in your local area to find the best policy for you, and gain advice from professionals about the best way to get coverage.
Scammers use various tactics for car insurance scams. One of the most common to watch out for is staged accidents. These are accidents that are set up so scammers can get a quick settlement from their own insurers. Staged accidents are especially common in no-fault states like Michigan because your own insurance will pay for damages regardless of who is to blame. Common staged accidents include parking lot accidents, left turn yield collisions, and rear-end collisions.
2. Type of Fraud: Insurance Traps
Traps can happen for one of two reasons. Either your insurance company has sneaky terms and conditions that you are unaware of, or you have not been honest or up-to-date with the information you provide your insurer. An example of the former is: most home insurance policies do not include the contents of your garden or yard, such as bikes, trampolines, and gazebos. If you lose or damage those items via theft or something like a storm or flood, you will not be able to make a claim. So, ensure you check whether there is a “contents in the open” exclusion in your policy.
As for the latter, an example would be: having a pre-existing medical condition that you do not tell your insurance company about. Whether you forget to tell your insurer or whether you intentionally lie about it, your claim will most likely be denied, and your policy will be voided.
Another trap to avoid concerns travel insurance policies. If you have something stolen when you are traveling, you need to prove that you owned it in the first place. You will most likely need to provide a receipt for the item, regardless of when it was bought if you want your insurer to pay-out.
You must also avoid the trap of policies not automatically renewing. Do not make the mistake of thinking your policy will automatically renew unless that has been officially stated. If you need to make a claim when your policy has run out, you will not be able to do so. You should also avoid falling into the trap of purchasing additional insurance options, such as special, accidental coverage and mortgage insurance. Determine what you need and do not need to be included in a policy so that you do not pay over the odds for elements you do not require.
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