Life insurance fraud is a black eye for both life insurance companies and life insurance clients. Both parties have been guilty of life insurance fraud and will be again – especially as, unfortunately, fraud appears to be on the rise by most statistical measures.
Research conducted by the nonprofit The Coalition Against Insurance Fraud concludes that life insurance fraud by all parties costs an average household $ 1,650 per year and increases premiums for life insurance. 39; 25% life insurance.
Life insurers are most often guilty of insurance fraud in the form of "churning" their agents. This is where the agent seeks to cancel your existing life insurance policy and replace it with a new policy that is paid for by the 'juice', or cash value, of your policy. existing. Agents do this to earn more commissions without having to research new business prospects. Churning can result in higher premiums for a client and clearly costing them on their cash value.
Another insurance fraud practiced by agents, however, is called 'windowing'. This is where, being unable to obtain a client's or applicant's signature on a required document but already having that signature elsewhere, the officer holds a signed document behind the unsigned document, press it against a window to shine light, and trace over the signature with a pen to forge the signature of the client or applicant.
When big insurance companies make their agents do bad things, it makes the headlines, but the point is, the public is much more guilty of insurance fraud than companies. And of course making bogus claims is the thing they do the most, which is why all claims on life insurance death benefit payments come under scrutiny. 39; an investigation.
But the misrepresentation of financial income background or information is another form of insurance fraud often practiced by consumers. They may be embarrassed by their medical history or income, or they may find that if they are telling the truth, their coverage will be diminished or their premiums will be very high. If a life insurance company finds out that a person has lied on their claim, they have the right to either not pay the claim or not pay the full death benefit as per the circumstances and the police.
But there are things that life insurance buyers can do to protect themselves against insurance fraud because they don't have the great investigative resources that insurance companies have. life insurance policy.
Remember, when it comes to life insurance, if it sounds too good to be true, it probably is. There is no free lunch.
Keep all of your life insurance documents, including getting receipts for every penny you give your agent, and never ignore notifications from your life insurance company .
Life insurance is never free and it is not a retirement plan, although some policies can actually fund themselves – but they never start out that way.
Never buy coverage that you feel is highly unnecessary, never let yourself be pressured into, and never borrow to fund life insurance.
While it can be part of an investment portfolio, the number one role of life insurance is to protect against the unexpected – and most people don't. don't need life insurance in their later years. It is meant to be temporary.