When a person gets a life insurance policy, they expect that it will be there for their family when they need it. Unfortunately, as with other types of insurance, life insurance fraud is a serious problem in America today. The fact that life insurance fraud, by its nature, can go undetected for decades, and in many cases only comes to light once the purchaser has passed away makes it a particularly attractive opportunity for criminals.
Types of Insurance Frauds
There are a variety of different kinds of insurance scams, but most of them are variations on a few basic kinds of fraud:
- Premium Theft—the most basic kind of insurance fraud is premium theft, where an insured person pays their monthly premiums on time to a legitimate insurance company, but their payments are stolen by the insurance representative that receives the payments. This kind of insurance fraud has become much less common as consumers have switched to paying by direct deposit or electronic bill-pay systems. If paying by traditional methods, an insured party should always pay their premiums by check or money order made out to the insurance company itself.
- Churning—churning frauds involve an insurance agent convincing clients to constantly cancel, renew, or open new policies. Insurance agents are paid primarily through commission, and typically make significantly more on insurance policies during their initial year than existing policies that are being renewed. By causing clients to constantly change policies an unscrupulous agent can generate significantly more revenue for themselves personally, but this keeps an insured’s policies in a state of confusion and excessively complicates it for the consumer.
- Over/Under Coverage—like churning scams, over or under coverage frauds make an insurance agent money at the expense of their clients by convincing them to act against their own best interests. This is done by either selling them coverage that they do not actually need, or by misrepresenting what a given policy provides in order to sell a more profitable product that will leave the customer underinsured.
- Ghost Companies—this kind of insurance fraud is the most difficult for a con artist to manage. As the name implies, it involves issuing insurance policies from non-existing companies, or in some cases selling products that are made to appear to be life insurance, but are in fact something else that does not fall under government regulation and likely will not actually provide the services that a customer expects.
- Recent Changes in Beneficiaries Prior to Death– See our winning Bokemper case listed on my website which can directly link to our favorable decision for the widow. If you want to challenge the change in beneficiary, it is imperative to seek legal help immediately b/c once the benefits are paid by the insurance company to the “wrong party”, then are difficult to recover.
The best thing a consumer can do to avoid fraud when buying a life insurance policy is to verify the company’s record with the appropriate state agency. Some warning signs of potential fraud include things like:
- Unfamiliar companies, or companies you can’t find much information about.
- Companies offering significantly below-market rates.
- Insurance agents that avoid answering questions, or give vague or dissatisfying answers.
- Companies or agents that request you to pay premiums in cash, or checks written out to the agent personally rather than the insurance company. Regardless of how convincing a reason they may offer, there is no legitimate reason for this.
Ohio Probate And Insurance Attorneys
It is much better to avoid life insurance frauds than to make your family try to recover from them after your passing. If you or someone you love has already been the victim of a life insurance scam, we can help. Contact the Law Office of Mike Gertner today to discuss your situation with a representative today.