Common Life Insurance Scams You Should Avoid

Hello All,

Despite the honorable intentions insurance companies and life insurance purchasers have, the sad truth is some people still want to play the system and feel the need to try and make a dollar at someone else's expense. They turn a tool that's purchased as a benefit for your family into an unscrupulous way to make some dishonest money. It can also hurt you. Make sure that you also register your life insurance company name with a database to prevent lost life insurance.

One common technique tricksters use is offering to purchase your life insurance. In this scenario a stranger owns someone else's life insurance policy. With life insurance policies you typically can't sell your policy until you've had it for two full years – it's a no no. At this point, the scammer suggests paying the money for the policy up front, even offering to pay the premiums for two full  years. Usually it's a large policy worth north of $1 million and often times they consider it a loan. If the policy holder dies before the full two years, the family gets the policy benefit and uses it to pay off the loan. If the insured isn't dead they can choose to sell the policy outright and use the money as repayment on the loan, hold on to the policy and pay on the loan (and any accruing interest), or (and this is where the scammers come in) sign over the policy to the lender/scammer – doing this they pay zero on the loan. With the last option, the lender (scammer) becomes the beneficiary when you die. Often they seek out the elderly as victims since, statistically, they are more likely to die sooner – they make better profits. If the insured chooses to pay back the loan they're out the money. If you sell the policy, or it reverts to the lender, you might find you can't get insurance later on.

Another scam engaged in by unscrupulous insurance agents is called churning. One of the financial opportunities life insurance companies offer is an annuity. Annuities have an added benefit of regular income once you've paid in in premiums. As you make regular payments, the money grows as the insurance company invests it. Many companies lock out payments on annuities for 10 to 15 years, however, so they're typically considered a long-term investment. Some deplorable agents offer a scam to older seniors in which they exchange their current annuity with new annuities for an instant cash bonus. The senior then finds themselves stuck with a new, locked annuity without the bonus. Only by paying a large penalty fee can they withdraw money from the annuity. Sometimes they do receive an instant bonus, but not usually generous enough to pay for the fact they now have no regular income. For those over retirement age who relied on the annuities to help with their retirement this scam can be particularly devastating.

Sometimes it isn't easy to see a scam coming, even for those of us with plenty of experience and who know what signs to look for. It is often blindsiding for anyone with little or no experience when dealing with life insurance, especially if this is the first time you've gone shopping for insurance. If you can arm yourself with some research and facts before hand it can save you, or someone you care about, in the long run.

 

Until next time,

Michael Hartmann http://www.findyourpolicy.com/

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