Common Insurance Scams You Need To Avoid
A good life insurance plan provides financial protection and puts all your worries to rest. Whether you’re looking for income replacement or retirement benefits, investing in insurance will give you peace of mind. However, the process of shopping around for a good policy can be stressful for some people. At times, you might encounter scammers who impersonate reliable insurance agents or ghost brokers. Unsuspecting consumers are the common victims of these fraudsters.
When you engage in business with insurance fraudsters, you might put your finances at risk. To avoid financial loss and legal troubles, it’s best to identify the most common forms of life insurance fraud. In this blog, we will list fraudulent activities and dubious sales tactics associated with insurance scammers.
Over-selling an Insurance Policy
This sales tactic involves misleading customers into paying for riders or extras that they don’t need. While upselling an insurance policy isn't necessarily a scam, consumers end up paying more than they should. Some insurance companies are guilty of employing this aggressive sales tactic. As a result, you could be over-insured. When you carry duplicate or overlapping policies, the premium costs will have a direct impact on your financial health.
To avoid getting excessive coverage, meet with your insurance agent for a policy review. This will help you make sure you’re paying the right price for your coverage.
Unlicensed Insurance Agents
Insurance is a heavily regulated industry with its own specific laws per state. All insurers in the US are required to comply with regulatory requirements in their home state or country. Before an insurance agent can sell products, they must obtain a license in the state in which they plan to operate.
Working with unlicensed insurance agents has potential risks. They may not have the required level of experience or knowledge when it comes to insurance products. When you work with unlicensed agents, there are higher risks of fraudulent and unethical practices. Do your due diligence and check the insurance company’s license. This will prevent you from encountering issues with claims or billing.
Churning
This is the term used when an insurance agent switches a client’s insurance coverage without notifying the policyholder. They might mislead or deceive the policyholder into switching to a less valuable insurance plan. Any changes in coverage based on misrepresentation are already considered churning.
Agents who engage in churning do this to secure higher commissions. Whole life insurance plans generally have the highest commission income for the agent. While updating your existing coverage is a legitimate practice, churning is illegal and unethical in most states. Insurance professionals who commit this misconduct will face severe fines and sanctions.
Telephone and Email Scams
Scammers and fraudsters have leveraged modern technology. Fraudulent calls and email phishing scams are the most common you might encounter. Be wary of phone calls and emails from someone pretending to be an insurance agent. These fraudsters will obtain your personal information to commit identity fraud. Aside from this, they may claim there's a problem with your existing policy and ask for your Social Security number or credit card number.
You can avoid becoming a victim by ignoring unsolicited calls and emails. You should never disclose any personal or financial information. These simple tips can help counteract the threat of insurance scams.
How to Avoid Insurance Scams
Being proactive will protect you from falling victim to these insurance scams. Here are a few tips that you will find helpful:
- Choose a reputable insurance agency
- Don’t answer unsolicited calls or emails from unverified insurance companies
- Confirm if the insurance agent is licensed in your state
- Don't fall for “too good to be true” insurance deals
- Ask for referrals from friends and family
- Shop around and compare insurance quotes
- Don’t pay your premium directly to an agent
- Always read the fine print
Your Local Insurance Agency
Follow our tips to prevent becoming a victim of insurance scams and red flags. At Local Retirement Group, our goal is to help you protect what’s most important. Our agents are committed to providing comprehensive insurance solutions to individuals and businesses.
From health to auto insurance, we will guide you until you fully understand your coverage options. Our insurance agents will be there to help you build a secure tomorrow. To schedule an appointment with us, feel free to give us a call today.
