Life insurance fraud is a black eye for both life insurance companies and life insurance customers. Both parties have been and will continue to be guilty of life insurance fraud – especially since, unfortunately, by most statistical measures fraud is on the rise.
A study by the non-profit organization The Coalition Against Insurance Fraud concluded that all-party life insurance fraud costs the average household $1,650 a year and increases life insurance premiums by 25%.
Life insurers are most likely to “catch up” on insurance fraud in the form of their own agents. This is where the agent wants to cancel your existing life insurance policy and replace it with a new policy that pays for the “juice” or cash value on your existing policy. Agents do this to earn more commissions for themselves without seeking new prospects for business. The bump can result in increased premiums for the customer and can cost them significantly more than their cash value.
Other insurance frauds carried out by agents are called “windowing”. Here, an agent who can’t get the customer’s or applicant’s signature on the required document, but already has it elsewhere, grabs the signed document behind the unsigned document, presses it against the window to let the light through, and follows his tracks. over the pen signature to forge the signature of the client or applicant.
When agents of big-name insurance companies do bad things, it makes big headlines, but the fact is that insurance fraud is more than just the companies themselves. And of course making false claims is what they do most, so all life insurance death benefit claims are investigated.
But misrepresenting information about background or financial income is another form of insurance fraud that is often committed by consumers. They may be embarrassed about their medical history or income, or they may realize that if they tell the truth, their coverage will be reduced or their premiums will be too high. If a life insurance company discovers that someone has lied on their application, they have the right to not pay the claim or not pay the full death benefit, depending on the terms and conditions of the policy.
But there are things life insurance buyers can do to protect themselves from insurance fraud because they don’t have the vast investigative resources that life insurance companies do.
Remember, when it comes to life insurance, if it sounds too good to be true, it probably is. There is no free lunch.
Save all your life insurance documents, including getting a receipt for every penny you give your agent, and never ignore any notice from your life insurance company.
Life insurance is never free, and it’s not a retirement plan, although certain policies can actually be self-funding — but they never start out that way.
Never buy any life insurance you think you don’t need, never put yourself under pressure, and never take out a loan to finance life insurance.
Although 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 need life insurance in their later years. This is meant to be temporary.