A Closer Look at Life Insurance
A life insurance policy is a contract between you and the insurance provider where the insurance provider agrees to pay a tax-free lump sum to your dependents or named beneficiary in the event of your death. People take out life insurance policies for a number of reasons. You may want Life Insurance to provide some financial security and peace of mind for the family or to cover the payment of an Interest Only Mortgage.
Life insurance can be purchased by individuals, but is also offered as a perk by many employers. Often times, large employers and government employers offer group life insurance at no cost to the employee.
The cost of life insurance varies depending on such factors as your age, health, and occupation. For example, the premium for a 25-year-old, male, non-smoker in excellent health will be far less expensive than a similar policy for a 65-year-old male smoker. Similarly, a sky dive instructor would have to pay much higher premiums for life insurance than would a librarian.
It is quite easy to become a life insurance scam victim if you are not aware and educated of what to look for. Here are 3 ways a life insurance agent could try to scam you:
Coverage that you don’t need!
This is a classic case of mis-selling. This type of fraud involves the unethical practice of a salesperson misleading a customer about the characteristics of a policy. For example, let’s assume that you are an elderly investor with a large amount of savings but with no dependent children. Let’s also assume that your spouse is deceased. In this case, you would arguably have little or no need for whole life insurance. If an insurance salesperson describes the product as something you urgently needed to protect your assets in the event of your death, that could be considered a case of mis-selling.
Persuading you to pay ‘Cash’
We strongly recommend that you never pay your insurance premium in cash. Paying cash would be a grave mistake. You need proof of payment, so always pay by check or a money order made out to the insurance company directly or to the agency—not to the individual agent or broker. In addition, always request a receipt.
If you pay in cash and get scammed, the worst part is that your family will only come to know of this scam when you have met with some mishap and they find out that there is not enough insurance to cover them.
Coaxing you with false benefits!
This is one of the oldest tricks in the book. Insurance agencies and agents have a way of promising much and delivering very little. Look out for life insurance agents that offer you plans, with a guarantee that the policy would run premium-free for a specific period. Some agents play it smart and offer you great discounts for signing you up for a new policy, while replacing it with an old policy. The trick is that the old coverage gets terminated and new coverage does not get initiated due to the cumbersome procedural bottlenecks. Thus, exposing you to risk without cover.
Where’s the Policy? You should receive a copy of any type of insurance policy complete with endorsements and declarations specifically outlining your coverage and its limitations within a reasonable period after your purchase. If you do not receive it, question your agent or broker. If there is no satisfactory explanation for the delay, contact the authorities immediately. You may not have the insurance coverage you paid for.