Life Insurance Fraud Life insurance fraud is a black eye for both life insurance companies and life insurance customers. Both parties have been and will be found guilty of life insurance fraud again - especially since, unfortunately, fraud appears to be increasing according to most statistical measures.
A study by the non-profit organization The Coalition Against Insurance Fraud finds that life insurance fraud by all parties costs households an average of $ 1,650 per year and increases life insurance premiums by 25%.
Life insurers are most often guilty of insurance fraud in the form of "churning" of their agents. This is where the agent seeks to terminate your existing life insurance policy and replace it with a new policy that is paid for by the "juice", or cash value, in your existing policy. Agents do this to earn more commissions without having to look for new business opportunities. Churning can increase premiums for a customer and clearly deprive them of their cash value.
Life Insurance Fraud
Another insurance fraud practiced by agents is however called "windowing". This is where, unable to obtain the signature of a client or requester on a necessary document but already having this signature elsewhere, the agent holds a signed document behind the unsigned document, presses it against a window to make the light shine and trace on the signature with a pen in order to falsify the signature of the client or the requester.
When big-name insurance companies ask their agents to do bad things, it makes the headlines, but the fact is that the public is much more guilty of insurance fraud than companies. And of course, making false claims is what they do the most, which is why all claims on life insurance death benefits are investigated.
But a false statement or information about financial income is another form of insurance fraud often used by consumers. 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 very high. If a life insurance company finds out that someone lied about their claim, they have the right not to pay the claim or to pay the entire death benefit depending on the circumstances and the policy.
But there are things that life insurance buyers can do to protect themselves from insurance fraud, as they don't have the great investigative resources of life insurance companies.
Remember that in life insurance, if it sounds too good to be true, it probably is. There is no free lunch.
Keep all of your life insurance documents, including obtaining receipts for every penny you give your agent, and never ignore notifications from your life insurance company.
Life insurance is never free and it is not a pension plan, although some policies can actually be self-funded - but they never start that way.
Never buy coverage that you think is highly unnecessary, never be pressured and never borrow to finance life insurance.
Although it can be part of an investment portfolio, the number one role of life insurance is protection against the unexpected - and most people do not need life insurance during their last years. It is intended to be temporary.
