How To Detect Life Insurance Scams

3 Ways You Can Notice Life Insurance Fraud

The decision to get a life insurance policy is something multiple individuals consider since it can help protect their loved ones from experiencing painful financial losses if something terrible happens to them, such as disablement, death, etc.

In addition, having life insurance may also provide financial security and help pay for living expenses, debt, medical, or final expenses. However, despite the good intentions of having life insurance, many perpetrators are lurking to scam you with your time and resources. Thus, it would be best to know how you can detect these life insurance scams to protect yourself from them.

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Spotting Life Insurance Scams

If you’ll be purchasing life insurance for the first time or looking for a new policy, it’s crucial to be aware of scams that will hurt your finances. In most cases, scams are carried out by individuals who aren’t legitimate life insurance agents (or don’t have licenses).

They’re simply perpetrators looking for ways to get a hold of your money or information. Thus, it would be best to consult reputable insurance providers, such as Assurance IQ life insurance companies, to avoid fraud.

Here’s how life insurance scams usually work and how you can keep away from them:

1. Unfamiliar Life Insurance Provider

According to the Insurance Information Institute, you can choose from over 800 life insurance companies in the US. However, It’s very unlikely you’ll spend time knowing them all. If someone comes to you and tries to sell a policy from a provider you haven’t even heard about, it would be best to do some research.

You can start by looking at your state’s insurance department. By doing this, you can determine if the company has a license to operate in your respective state. If it doesn’t have one, it’s obviously a scam. Furthermore, if it has a license, it would be best to quickly search the internet to determine if its information is available online.

Scammers know what they are doing. Even if they work for a fake company, most manage to get a presence online. However, it’s crucial to remember that if there’s not much publicly available information about a life insurance company, there’s a significant chance of fraud.

Falling into the trap of a scammer is such an awful experience. If you have applied with a sham insurance company, they might steal your identity. Through this, they can do a lot of damage, such as using your name to open accounts, get health insurance claims, and many more.

2. Stranger’s Policy

A STOLI or stranger-originated life insurance is something most scammers use to make you fall into their trap. This usually involves a circumstance in which an individual funds another’s (stranger) life insurance premiums to become one of its beneficiaries.

For example, a 75-year-old individual has an insurance policy you’ll be funding as a third-party investor. In exchange for that, the insured will make you a beneficiary. This means that when the 75-year-old dies, you will receive the death benefit, a big chunk of money that is more than the number of premiums you paid.

Now, this sounds really tempting. However, it’s crucial to remember that this arrangement is illegal in the US. This is because the beneficiaries listed by the insured should have an insurable interest. When we say insurable interest, the beneficiary will suffer a devastating financial loss if the insured dies.

If someone offers to purchase a stranger’s life insurance policy, it is best to turn them down immediately. Not only will you lose your money, but you also don’t have anything to gain from it.

3. Coverage You Don’t Need

Some licensed life insurance agents can also scam you. They tend to do this by forcing you to get the coverage you don’t need. Thus, it would be best to research before deciding what coverage is essential for you.

It’s crucial to know that life insurance agents have many ways to help you know the overage you might need. They might multiply your annual income ten times (or more) to determine your needed coverage. Or, they might also use other approaches, which can be a tool to know how much your family’s financial needs are in case you die.

The best thing you can do is to calculate your coverage need and check if it matches your agent’s coverage estimate. If the insurance agent suggests getting higher coverage, it doesn’t necessarily mean they are scamming you. Most insurance agents will do so because they think providing more coverage would benefit them.

However, if an insurance agent insists or forces you to get more coverage even if you can’t or don’t want to, they might be thinking about getting a huge commission and not your well-being.

Purchasing life insurance is an essential financial decision you’ll be making in your entire life. However, to get a policy and enjoy its benefits, you’ll be required to provide information and pay premiums. This will be wasted if you ever get scammed. Thus, it’s best to ensure you get the right insurance policy from a reputable life insurance provider to avoid any fraud that can harm you in the long run.

How To Verify If An Insurance Website Is Safe

If you feel a website offering great life insurance quotes might be suspicious, feel free to verify it using our unique Scam Detector website validator below:

How To Report a Life Insurance Scammer

Let your family and friends know about how to detect life insurance scams by sharing this article on your social media. Also, you can officially report scammers and any other suspicious insurance activity to the Federal Trade Commission using this link:

Report To The FTC Here

How To Protect Yourself More

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Meanwhile, educate yourself with some other Amazon fraud-related articles right under this paragraph, so that you know how to stay safe online. Last but not least, use the comments section below to expose other scammers.

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