Life Insurance Scams To Avoid This Year
Many life insurance scams have surfaced and continue to pop up during this time full of uncertainty. People want to protect their families, so they tend to pay bigger life insurance policies if something terrible happens to them. The more buyers there are, the more significant number of new agencies offering these policies there is, making it more challenging to find the best possible offer – and, of course, most trustworthy.
The process of finding a perfect life insurance policy that will be in line with your interests. It could be stressful and troublesome. However, what makes it even worse is the fact that this field is a frequent target of scammers.
If we consider the statistics provided by the Coalition Against Insurance Fraud (CAIF), we find out that life insurance fraud is among the most major crimes worldwide, taking people more than $80 billion per year. That’s just a small part of the overall insurance scams category.
In order to make you aware of the possible criminal acts that you can come across when buying a life insurance policy, we gathered the 10 most frequent life insurance scams, show you how they work and the means you can take to protect yourself from their dishonest agents.
By going through these life insurance scams, you may discover that you are already a life insurance fraud victim. That is why we also included tips on what steps you can take in this situation.
Types of Life Insurance Scams
As you may know, besides those already existing life insurance scams, many other types are being introduced these days. Let’s take a look at the most typical life insurance fraud. If you are interested to read about rental insurance scams or health insurance scams, click the links. Let’s start:
1. Identity Theft Scams
The first one on our list is a widespread life insurance scam, which is not easily discovered by targets. What happens is that a victim starts communication with a person who pretends to be an agent from his/her life insurance company. This can be either via phone or email. The excuses that these fake agents use are different, including the following:
You have inherited money from your relative. To get the money as soon as possible, you need to provide your life insurance company with your financial account information or a social security number.
The insurance company is experiencing an issue with the customer’s insurance policy, so they need his/her financial account information. The agent will also claim that the customer’s life insurance installment is not paid, and the payment can be processed if he/she provides a credit or debit card number.
These are compelling reasons for making the victim unaware of the fact that they have stolen his/her identity. If the criminals have all your data, they can use it to make large purchases, open new bank accounts or credit cards, cause extreme harm, and leave a person with huge problems.
Our suggestion is always to determine whether this person is a real agent or not by asking various questions. Furthermore, we need to emphasize that people should not give anyone their personal information, especially not over the phone or via email.
2. Fake Life Insurance Websites
People have reported that they were searching the net when they found fake life insurance websites. What made them suspicious is that these life insurance companies offered them a chance to sign up for a desirable and affordable insurance policy online. You only need to provide your credit card or bank information to sign up.
Well, for a careful and wise person, these scam life insurance websites would not be a threat, but some people can be attracted to their promise to give you a life insurance policy at much lower rates than expected. So, they sign up and become victims of life insurance scam as the thieves take their money.
3. Overselling a Policy
When you read about this issue, you may think that it is not a real scam, but actually, a deceptive practice made by life insurance agents. However, it still goes under the life insurance scams category.
These agents work on commission, meaning that the more expensive policy they sell, the greater their wages are. So, they take advantage of people who are not familiar with the life insurance field by offering them things that are not necessary.
To earn more money, they sell consumers a policy that they do not need, making them pay more than they are supposed to. One type of this deceit is to add is a double-indemnity rider.
This means that your survivors will be paid the double sum in the case of accidental death. When you reach a certain age, it is more likely that you will die due to an accidental death than due to an illness. So, you will be paying extra during the years you manage not to die accidentally.
Another kind of deceit is the waiver of premium rider. According to it, your coverage will be continued in case of a sudden disability. This is also a situation that may never happen or is not a frequent case with people during their working years, but they still pay the higher commission during these days.
4. Surprise Beneficiary
No, you are not as lucky as you may think you are. Surprises should be related to life insurance companies by no means. Do not get fooled by people claiming or receiving an email saying that you were so lucky to become a beneficiary from another person’s policy.
These situations do not happen. If they do, you will not be informed about them via email. In case you are told about your policy being connected to another life insurance policy, do not trust them. Do not provide the thieves with your personal information.
5. Fake Insurance Company
Just like there are real-life insurance websites but with deceptive practices, there are also phony life insurance companies whose main aim is to convince victims they are real, take their money, and run off.
To avoid becoming easy prey to this life insurance scam, our suggestion is to do detailed research (check their website on our Scam Detector website validator), find out all you can about the life insurance company, take a look at people’s reviews and comments as well as verify their accreditation. Only if all this seems real and trustworthy should you think about becoming its client.
Here are five more life insurance scams, below:
6. Insurance Agent Fraud
Unlike the scam is pulled by the insurance agents that we mentioned earlier in our article, this life insurance scam can really be considered a fraud. There were instances when insurance agents actually stole money from clients. They have done so by putting money aside for themselves.
What they do is charge a customer for a policy that is not set up. If the client never calls to get information about his/her policy, this may remain undiscovered for years.
There were cases when the customer paid higher costs, and the agent keeps the difference. The most frequent victims of this life insurance fraud are older adults.
7. Churning Insurance
Signing a policy with an insurance agent makes the customer’s information available to him/her so that he/she can adjust it or outline new policies. If a customer does not check his/her policy and just keep on paying the premiums, it makes an ideal situation for a fraudster to commit a life insurance scam.
In these cases, agents offer a client to change their policy with equal or more excellent value. This new policy can be with the same insurance company or with the new one.
It is worth emphasizing that if a change to a more valuable policy is suggested for the same or lesser premium by the agent, this is actually his or her legal right. This means that the change will be useful and beneficial to the customer.
However, if the change is made to a less valuable policy for the same amount of money or even higher one, this is considered illegal.
If you have to deal with an honest agent, you will get the documentation representing all the benefits you will get with the new policy, and you can choose to agree or disagree with it.
On the other hand, if a change is made without providing documentation, you must be suspicious, as it is probably life insurance fraud.
8. Problem with Your Life Insurance Policy
If you get an email stating that there is a problem with your life insurance policy, you need to be suspicious. Even though it seems like coming from your life insurance company. It can be a criminal who pretends to be an official agent, so you must check.
The excuses may be that you did not pay your last premium or that your policy is canceled.
Getting this kind of message may cause you to feel worried about your money already taken for that policy, so you would like to keep your coverage. They know this, so they will ask you to provide your Social Security number or password to achieve this. You should never do this.
9. Twisting Insurance
When twisting is in question, you may come across an agent who lies about your net worth. He/she does that to attract you to buy a larger annuity policy. The best way to protect yourself from life insurance scams is to be informed. Here is how the Twisting Insurance works in detail.
10. Unbelievable ‘Teaser’ Rates
Last but not least, life insurance policies are not cheap. If you come across a website that promotes a policy at affordable rates, you need to make a double check before signing the papers.
This is a general marketing approach where healthy people receive the highest possible discount. Upon applying, you will discover that your coverage will cost much more than stated in the advertisement.
Life Insurance Scams Video
Watch the video below to see in video format the most common life insurance scams:
How To Report a Life Insurance Scammer
Let your family and social media friends know about these Life Insurance Scams by sharing this article online. You can also officially report suspicious characters to the Federal Trade Commission (FTC) using this link below:
How To Protect Yourself More
If you want to receive the most notorious scams every week by email, subscribe to the Scam Detector newsletter. You’ll be sent periodic emails. Meanwhile, educate yourself with some other insurance fraud-related articles listed under this paragraph, so that you know how to stay safe online. Don’t hesitate to use the Comments section below to expose other scammers.
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