How to Avoid Insurance Scams

Buying an insurance policy is a big deal and it's important to understand what you are paying for. But the process can be confusing, especially with insurance companies able to sell a wide range of financial services. Most transactions are honest and ethical but there are cases of dishonest or illegal actions designed to take advantage of the unsuspecting. Some knowledge can help you avoid insurance scams.

Instructions

Difficulty: Moderate

1. Deal with an agent you know and trust. Insurance agents are in a position to mislead you, sell you a policy full of red tape and loopholes or be driven by a big commission on your sale, but you can help avoid being the victim of an insurance scam by choosing your agent carefully.
2. Be skeptical. Statistics can be manipulated, benefits can be exaggerated and fine print and loopholes can undo all the reasons a policy might sound like a good buy. Check out every claim made in a sales pitch and don't be persuaded by scare tactics. Ask questions about cancellation policies, the premium structure over time, inflation protection, the company history, the agent's commission and any other aspect of the transaction. If it sounds too good to be true, it probably is.
3. Ask for outside help. An insurance policy is a contract, so you can bet the company has worked with its attorneys to write language that protects their interests. Get your own attorney to look over the wording to make sure that you will get the benefits that are promised. Know that the details in the policy you sign are binding, while the great things touted in the promotional brochure are not. Don't commit until you understand everything completely.
4. Involve your family. A few more eyes and ears on the process can be helpful to avoid insurance scams and your family is likely to be the ones filing claims if you are incapacitated. Don't let your elderly family members make insurance decisions on their own.
5. Shop around. Check out similar coverage from a number of different companies. Most experts suggest you be very careful if one policy is 30 to 50 percent lower than competitors. If you are tempted by the lower rate, be sure you understand why they are so much cheaper. Also, investigate whether any insurance company is stable enough to be around when you need them.
6. Maintain a paper trial. Use a check or money order for payment; not cash. Keep a copy of everything you sign. Get a copy of the actual policy. Don't sign any blank forms.
7. Know what types of insurance scams to avoid. They can be as blatant as a con artist "agent" pocketing your premium or selling you a policy from a company that doesn't exist. Or the scam can be subtler, such as "churning" where an agent sells you a more expensive policy you don't need just to pocket the commission. Also watch for "sliding" where the agent slips in coverage you don't want or need but pay for anyway.