6 Life Insurance Cons That Will Ruin You
Whether you’re a novice or a seasoned veteran at buying insurance, no one is immune to insurance scams.
Knowledge is the best guard against getting scammed, which is why education is key to making a good decision. The more you know, the better prepared you’ll be to recognize the tell-tale signs of a scam. Below are six life insurance scams commonly employed against unsuspecting insurance shoppers.
1. Bait and Switch
The most frequently targeted group for this scam is the retired elderly, but that doesn’t mean it can’t happen to anyone. Dishonest agents will often claim they are selling one thing, when in fact you are purchasing something completely different.
NEVER purchase a policy without knowing precisely what you’re getting. ALWAYS read everything an agent gives you, even the fine print. If you aren’t familiar with a term or are uncertain of a passage’s meaning, ask for clarification. If the agent seems unwilling to give a thorough, satisfying answer-or brushes off the question altogether-you may want to consider getting a new agent.
Don’t be afraid to take along a friend or family member who is more familiar with insurance, if you think they are capable of helping you make better decisions.
This scam is when an agent encourages a customer to cancel a current policy for another by “twisting” the facts. The agent is usually from a different insurance agency and is attempting to get you to switch to a new policy by misrepresenting any information about your current policy and insurance provider, as well as what they are offering.
There are times when changing your insurance provider is the right thing to do, but avoid situations where you are rushed or pushed into doing so. Also, never get a new policy without first closing your current one. Make sure that the new policy is what you need, not what an agent needs to make more money.
Similar to twisting (they are often considered synonymous terms), churning involves a continuous process of an agent convincing a client to switch policies. Insurance agents who churn are seeking to fill their commission by using current clients instead of going about the more time-consuming task of finding new ones.
Agents seeking to fill their commission (or line their pockets) will attempt to keep changing your policy under the guise of getting a “better” plan, while in reality the new policy may cost more and cover less. This practice is illegal. One of the most common tactics used is to assure you there will be no additional cost, when in fact, the cash value of your previous plan is used to pay for the new policy-money that could have been used for other financial needs.
4. Premium Theft
When making payments on your policy, ensure your money reaches its intended destination. There have been many cases of dishonest agents who pocket large quantities of their client’s premium, instead of submitting it to the company. This scam is easily avoided by using direct deposit to your insurance company.
NEVER make payments through your agent, even if you think they are trustworthy.
5. Ghost Companies
In an age where anything and everything is done online, this scam is increasingly a problem. Scam artists conduct complex operations to appear as an insurance provider, when in fact the company they are posing as does not even exist. Insurance scam artists are not only active on the Internet, but call homes directly as well.
To avoid being lured into a deal with a “ghost company,” always make sure to do your research. Never have anything to do with a company you don’t recognize. Check with your state insurance department or the Better Business Bureau to see if the company is licensed and ethical.
If you’re being pushed to send money, recognize it as major red flag. Any company that wants to hurry you into a decision should be avoided. Steer clear of deals that sound “too good to be true,” because that is most likely the case. DON’T give out sensitive information, such as your Social Security Number or credit card number.
While you want to be adequately covered, there is such a thing as having too much coverage in your policy. Be wary of agents who try to sell you “package deals.” Chances are, there will be parts of the package that are completely unnecessary for you to have. Don’t let a sales-savvy agent convince you into purchasing anything you don’t truly need.
The opposite of this scam is when you are told you’re purchasing a “complete policy” when in fact you are receiving less coverage than you require.
The key to avoiding life insurance scams is to always know exactly what you’re purchasing. Find an insurance provider and agent you trust. If you think you’re being scammed, don’t wait for the damage to be done. Confront them and bring a third party into the situation if necessary.
Purchasing a life insurance policy is a daunting task-but armed with the right information, you should be able to recognize any scam artists or “bad agents” you may run into.