Insurance scams can occur on both sides of the fence, with insurance providers and insured parties both trying to con their way into more money. If you are looking to invest in a new insurance policy, there are a few things you should be aware of.
Fake Insurance Companies
While most of us know the big insurance companies, there are plenty of smaller fake companies that try to pass themselves off as real (of course, that’s not to say all small insurance companies are fake!). These fake companies will sell customers policies, collect the premiums, and never pay out when a claim is made.
Always do your homework if you are buying a policy from an insurer you have never heard of. Make sure they are licensed, and that they are a legitimate insurer before you hand over any money.
Crooked Insurance Agents
While there are many honest and law-abiding insurance agents out there, there are also a few who try to scam customers to make themselves a quick buck. Scams will often involve seniors, as they can be seen as an easy target.
This can involve the insurance agent intercepting premiums paid by the customer. The customer thinks they are up-to-date on their premiums, but the insurer, having never received payment, has actually cancelled the policy.
The US sees its fair share of these types of scams. “Twisting” involves an insurance agent falsely inflating a customer’s net worth, and then converting their existing annuities into one annuity policy with a different company. The agent benefits from a high commission, but the customer usually can’t keep up with the higher premiums and will often default and lose the money in the annuity.
“Churning” is another common scam, where the agent will replace an existing annuity with a new one to pick up the commission. However, this new annuity will be locked up for 10-15 years (with large penalties for withdrawing early), which can cause obviously problems for seniors.
Auto Insurance Scams
One popular scam involves pedestrians who are willing to throw themselves in front of moving cars. Usually, the car will not be moving fast, but it will allow the pedestrian to fake an injury, and the driver will have to pay up.
Advertisers on daytime TV often try to target gullible viewers. Unscrupulous insurance companies are sometimes to blame here, advertising low price insurance policies to viewers. The trouble is, some of these companies are advertising insurance products that don’t always offer what they advertise. Cut-price policies can seem like a good idea, however, they can come with loopholes to stop customers making a claim, and payouts can be much smaller than those from regular insurance companies.
What to do to avoid getting scammed
There are con artists in all walks of life, which is why you should always keep your eyes open to avoid potential scams. Always choose a trusted insurance provider, and read the terms and conditions in full. Keep a copy of all paperwork, and if a deal seems too good to be true, it probably is!