A good life insurance policy brings peace of mind since you know your loved ones will be well provided for in the event of your death. However, searching for a significant enough policy at lower prices can be stressful, mainly when scammers frequently target the market. Truth to tell, per the Coalition Against Insurance Fraud (CAIF), insurance fraud is one of America's biggest crimes, costing US consumers $80 billion each year.

It is possible, however, for consumers to arm themselves against con artists and unscrupulous agents. This guide will help you identify the commonly prevalent forms of life insurance fraud if you're shopping for life insurance. We'll also be sharing tips on how to protect yourself as well as explain what to do if you become a victim of fraud.

Kinds of life insurance scams 

Diverse life insurance scams and dubious sales tactics have come up over the years, impacting specific groups more than others. Below are a few of the most common types. 

Overselling a policy

Life insurance agents usually work on commission, implying that they have an incentive to sell you a higher-priced policy. As a result, consumers often do end up paying more than they should, even though upselling your policy isn't necessarily a scam.

The insurance industry's dirty little secret is this - they don't have to disclose commissions on any products they sell to consumers. If a consumer does not ask, they have no obligation at all to tell.

One thing some of these agents may try foisting upon the customer would be a double-indemnity rider. The latter could promise to pay your survivors double if you die in an accident. Past a certain age, accidental deaths are less likely relative to an illness-related death. The implication is that you'll be paying extra for all of those years you manage to avoid dying accidentally. 

Another extra to steer clear of is the waiver of premium rider, which promises to keep your coverage going if you're suddenly disabled. This is yet another thing that is statistically not likely to happen, particularly during a policyholder's working life. In both instances, the customer takes a chance on something that is somewhat chancy even as the life insurance agent misappropriates a higher commission. 

Insurance Agent Fraud

Per the Coalition Against Insurance Fraud, most insurance agents and companies are ethical, honest and trustworthy, but crooked agents and bogus insurers do exist. Insurance agents steal straight from clients in rare cases, setting money aside from a policy for themselves. This is realisable by quoting a premium to a customer for a policy that is never set up. If the victim calls to check up on the policy, the fact that a policy was never put in place would be discovered in time. Unfortunately, that kind of good fortune is hard to come by.

In some cases, the insurer quotes a premium that exceeds the actual cost, keeping the difference. Victims of any age can fall prey to insurance agent scams, although it is the lot of the elderly to attract scheming attention from finaglers. These unsavoury insurance agents pray for unquestioning customers. 

Churning 

A customer having signed with an insurance agent, that agent has all of the information necessary to tweak features or draft new policies under that person's name. These agents realise that many customers don't periodically revisit their policies. Rather they are content with merely paying the premiums when they're due.

Some agents sneak up to customers with the offer to supplant an existing policy with a new one of equal or greater value. The policy may be with the same insurance company or a new insurer, but in either case, the actual value of the life insurance is far less than the original policy. An agent who hints a customer switch to a more valuable policy for the same or lesser premium is well within their legal rights to do so, provided the change benefits the insured.

But when a customer is duped into switching to a less valuable policy, the practice is illegal. When a policy is superseded, an honest agent will provide documentation that delineates the advantages of the new policy, then have the customer conform to the changes. When an agent forces change without supporting documentation or detailed information, consumers ought to be suspicious.

Identity theft scams

Close to half of all data breaches relate to some stolen identity. Life insurance is one of the diverse ways swindlers collect personal information on their victims, using that information to open accounts and make purchases. For example, when identity theft scams concern themselves with life insurance, the customer hands over crucial information that can then be applied to open new accounts and purchase items using the victim's contact information.

A victim of this scam will receive some communication from a person claiming to work for their life insurer. The person could well use one of the following excuses:

• A relative has passed away, leaving money to the consumer. The criminal will then angle for financial account information or a social security number to facilitate payment.
• There's a glitch with the customer's insurance policy, and the caller needs some vital information to fix it.
• The customer's life insurance payment is overdue. The caller can process payment, provided the customer merely gives a credit or debit card number.

In the days immediately following this communication, the victim may be clueless their identity has been stolen. The criminal may use the credit card number to make purchases. If the information is used to open new bank accounts or credit cards or to purchase large items like a car, the consumer may find that corrective action is much more complex. A stolen identity can severely trammell a person's credit, leaving the victim encumbered with remedying the situation with diverse credit bureaus.

Keeping life insurance scams at bay

It can sometimes be a challenge differentiating between a good and bad agent, but consumers can take steps to shield themselves. Here are a few tips that will help you while you look for the right life insurance policy to protect your loved ones.

Consider an independent broker

Independent brokers have become more popular, particularly since the Internet has facilitating signing up and getting recommendations. An independent broker shops several insurance providers to provide the best price to meet a customer's needs.

Research the agent

With the aid of the Internet, you can learn about an agent before well before you have signed any documents. One means to check is the Department of Insurance website specific to the state the agent practices in. Often this will help quickly identify any past misdemeanours. Make sure the agent has an active license with no reported sanctions, preferably over the course of many years.

Research the agency

The mere fact that an agent is with a well-known agency doesn't mean anything. By reading reviews and investigating an agency, however, you can verify its reputability. 

Contact the agency

If you're working directly with an agent, don't hesitate to contact that agent's insurance company for verification. If it's a respected agency and they can attest to the agent's reputability, you can proceed with more confidence.

Ask for referrals

Friends and family can be a great help in identifying a dependable agent. Having themselves had personal experience with an agent, they would attest that the client's experience has so far been a good one. 

Shop around

Luckily, life insurance is a buyer's market, and there's no dearth of agents who are willing to give a quote. An excellent way to get a feel for the many options is to price multiple policies. You can then compare what you're being offered and quickly pinpoint any scams. If someone promises something significantly more for the same price, if not lower than competing insurers, that may well be a sign that something is wrong. 

Read the fine print

Prior to signing with an insurer, peruse all documentation carefully, identifying any terms that might cause future problems. To ascertain your policy documents, describe the coverage you're getting for the premiums you're paying. 

Take advantage of cancellation periods

Many policies have a free look period. During this time, you can cancel the policy, given there is a reason you realise it isn't what you thought. You should obtain a full refund of premiums if you cancel during this time. In this trial period, do more research to confirm you haven't made a mistake. If you are uncomfortable with any detail, cancel.

Question changes

Once your insurance policy is in place, you'll still be remaining vigilant, especially if your agent abruptly suggests making a significant amendment to your policy. If your agent is suggesting something that will increase what you're paying each year, obtain a second opinion from a respected life insurance agent. 

Be careful with your information

If you receive a call, email, or other communications about your policy, contact your agent or your life insurance agency and discuss it. Do not divulge payment information, contact details, or your social security number. Do so only if you're 100 per cent certain you're speaking to a bona fide representative from a service you use.

Conclusion 

There's no call for you to give evidence of gullibility by paying needless heed to insurance agents no better than ordinary scammers. But, though they are not numerous, you must still be prepared whenever you might cross paths with them. The wiles and skulduggeries of these habitual practitioners of misdemeanours are easy to get the hang of. Precautions against insurance scams will keep you safe. 

Should you need assistance, however, Fast Action Refund would gladly help.