How To Recognize A Life Insurance Scam
Life insurance scams come in all shapes and sizes
. They can be hidden in the most innocuous places, or shout at you from bright blinking Internet advertisements. Here are some glaring pointers that should let you know right away that you are or possibly will be a victim of a life insurance scam.Before purchasing a policy
Never force yourself into buying something you dont understand. Take the time to do the research, and in this day and age, youll find plenty of helpful, free resources online.
If its too good to be true, do a background check, run the numbers, and get as much feedback from external sources other than your own gut feeling, especially if the agent selling it to you is as congenial, convincing and persistent as they come. The best life insurance policies dont always have to be the most expensive, but they do need strong financial backing.
Always look at the rating of the carrier that is advertising the life insurance policy. If the rating is any lesser than A-, the carrier may not be worth your while or your business. Choose a carrier with a higher rating if you want a term life insurance policy that will last for many years, like a 25 or 30 year term policy. Life insurance does not see as much upheaval and sell-outs like some other forms of insurance, like long term care, but a stable, financially sound company can mean peace of mind up until the very last day that your policy was in force.
Do not sign blank forms or give away money to an agent without a receipt. Insist on documenting your life insurance application process to save you any later hassles.
If you have reason to doubt your agent, call your states Department of Insurance to do a background search. Buy from online aggregators or agents you trust, or have been highly recommended by reputed financial portals.
Run comparisons to get life insurance quotes on policy structures similar to the one you may be purchasing. If your numbers are much lower than even the cheapest life insurance policies that standard companies sell, find out why. Check online reviews of the carrier or product, and see what youre losing out on to pay such low fees.
If you were sold an annuity by a life insurance company, you may be offered the chance to buy a replacement annuity for a cash bonus. You may end up with no cash bonus and an annuity that kicks in after another 10 to 15 years of waiting, just like the waiting period on your first annuity. You may also be sold a large annuity to take the place of several smaller ones you may already have. Agents who are pushing this are sitting on top of some heavy commissions that are proportional to the size of the new annuity they are selling you. The same payout waiting period restrictions as before apply, and you may have to pay additional premiums in order to afford this expensive substitute.
Youre ready to sign on the dotted line of a new life insurance policy. You have most likely signed up for term life, but when the first payment is due, you realize the premiums are significantly higher than what you signed up for, and the language of the policy is different. You may have slyly been switched onto permanent life insurance instead without being informed because the agent is trying to take advantage of large commissions and any naivet that you may have displayed. Always, always read the fine print on any document before signing, and get clarifications from your agent immediately if you do not understand anything.
After purchasing a policy
Beware of stranger-owned life insurance, also called SOLI. SOLI is an arrangement in which a stranger is allowed to own a policy on someone elses life. While there are regulations in place that govern the use of SOLI, scammers like using lucrative offers that will pay off premiums for the first two years in the form of a loan for large policy values. You can choose to pay back the loan with interest, or sell the policy and repay the loan with money received from the sale. The preferred option from the eyes of the lender is the latter, where the lender receives a big payout when the insured dies. The elderly are usually victims of these scams, as they desperately desire some form of life insurance protection if old term life policies have run their course. They work heavily in favor of the lender because the chances of them dying are dramatically larger. You may also be sold bundles of SOLI in an investment package, a recent trend on Wall Street. Beware of these as they may end up losing you even more money if the policyholder lives longer than expected.1
If you notice any odd activity in your life insurance account, or are getting notices or charges for things you do not recognize or understand, call your carrier immediately. Never ignore a discrepancy thinking its too trivial to worry about.
You may be a victim of fake death by scammers who are celebrating heyday with your death benefit. It can prove to be hard to clear your name in such a twisted insurance scam, so get professional help as soon as possible.
You may find that some of these deals are verified and have worked for someone else you know and trust. Still, theres plenty of reason and proof that you may well be wasting your time. There are some easy and quick ways to make money, but at the cost of something as important as life insurance protection for you and your loved ones? We dont think so.
So what should be your next step if you are considering any of these options or have been a victim of such scams? Talk to a certified financial advisor such as fee-only planners or lawyers for resolution and sound advice today.
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