We put a lot of thought into our life insurance policies. How much we need, terms, limits, and costs all impact our lives and the people around us. So, policyholders, like you, must trust their insurance provider and agent. Unfortunately, there are some out there who want to take advantage of that. Using misinformation and tricks, they hurt vulnerable customers.
WHAT ARE THE COMMON LIFE INSURANCE SCAMS I SHOULD BE AWARE OF?
Scam artists develop new tactics every day. Some focus on making you pay more for less. Others use fake life insurance products to steal your personal and financial information. Here are some of their commonly used methods to look out for:
Always thoroughly check your insurance company’s website before trusting any information. Scam artists create fake websites that mimic your provider’s site. They will allow you to sign up and promise incredibly low rates. But they’ll rob you the minute you input your bank or credit card information.
It’s also possible to find websites advertising very low “teaser” rates that are technically legitimate. However, they are still using that selling tactic as a way to manipulate you. In truth, very few people receive the low rate they promise. But you only find out after you apply.
FAKE BENEFICIARY CLAIM
You may receive an e-mail or message that claims you’re the beneficiary of someone else’s life insurance. They may even name someone you know and claim they passed. Or, they might lie and say someone bought a policy for you. In either case, they will likely try to pull information from you. This is just one of many ways to steal your identity.
A PROBLEM WITH YOUR POLICY
Once again, the scammer will reach out to you. When they do, it will appear as if they’re from your life insurance provider. For example, the e-mail might look similar to official ones you have received before or link to familiar looking websites.
Then, they’ll claim something’s wrong with your policy. Often, the scammer tries to make you panic and act rashly. So, for example, the e-mail or message might say you missed your last payment. It will essentially ransom your coverage for details like your credit card information and Social Security number.
CHURNING AND TWISTING
Both churning and twisting are annuity-based life insurance scams. They take advantage of annuity-based insurance, which allows you to invest and earn an income stream through your policy’s company. However, the waiting period for a payout can last 10 to 15 years.
In churning, scammers offer an immediate cash bonus if you exchange your current annuities with new ones. But this resets the hold period. If you withdraw early, too, you face severe penalties.
In the case of twisting, the scam artist coerces you into buying a new life insurance policy in place of your old one. They use false or misleading information to get you to do this, like policy restrictions or hidden premiums. And at the end of both of these scams, the money lines the pocket of the agent.
HOW CAN I SPOT A LIFE INSURANCE SCAM?
There are a few ways you can identify potential scams. For example, the way they contact you may be suspicious. Look for flaws in their e-mails to you, such as misspellings or incorrect addresses.
Some scam artists are very good at what they do, though. If you have trouble figuring out if a company or website is legitimate, then contact your state’s insurance department. They can check if the company is real and if it can sell to you. The National Association of Insurance Commissioners (NAIC) can help you find your department’s contact information.
Don’t be afraid to make an insurer wait until you’re comfortable. Hold off on any paperwork until you’ve seen the agent is licensed. And avoid those who demand certain types of payment, like cash.