Health Insurance

life insurance fraud

Written by animalszoom

Life insurance fraud is a black eye for life insurance companies and life insurance customers. Both parties have committed life insurance fraud and will do it again — especially since fraud appears to be on the rise by most statistical metrics.

Research by the nonprofit Anti-Insurance Fraud Alliance concluded that life insurance fraud perpetrated by all parties costs an average of $1,650 a year and increases life insurance premiums by 25 percent.

Life insurers most often commit insurance fraud in the form of agent “spoilers.” This is where the agent seeks to cancel your existing life insurance policy and pay for a new policy with the “juice” or cash value from your existing policy. Agents do this to earn more commissions for themselves without having to look for new business prospects. Churn can lead to higher premiums for customers and obviously cost them cash value.

However, another type of insurance fraud committed by agents is called “windowing”. Here, since the client’s or applicant’s signature could not be obtained on the necessary document, but already had it elsewhere, the agent held up the signed document behind the unsigned document, pressing it against the window to make the The light shines through and then traces the signature over the pen to forge the signature of the client or applicant.

It makes headlines when big-name insurance companies let their agents do bad things, but the truth is that the public is more guilty of insurance fraud than insurance companies. Of course, false claims are what they do most often, which is why all life insurance death benefit claims need to be investigated.

But misrepresenting background or financial income information is another form of insurance fraud that consumers frequently engage in. They may be embarrassed by 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 very 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 circumstances and the policy.

But buyers of life insurance can take steps to protect themselves from insurance fraud because they don’t have the robust 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 paperwork, including getting receipts for every penny you give your agent, and never ignore any notice from your life insurance company.

Life insurance is never free, nor is it a pension plan, although some policies do self-fund – they never start that way.

Never buy any insurance you don’t think is necessary, never put yourself under pressure, and never borrow money to finance life insurance.

While it can be part of an investment portfolio, life insurance’s primary role is to protect against unexpected events — most people don’t need life insurance in their later years. It is temporary.

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