How to Avoid Life Insurance Scams
Insurance scams result in a loss of $150 billion per year in the U.S., according to the Texas Department of Insurance. Buying a life insurance policy from a scam artist can leave you with less money and no insurance coverage. Unscrupulous insurance agents might try to sell you high-risk investment vehicles, promising that they were low-risk.
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Instructions
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Ask to see your insurance agent's license. Depending on your state laws, it's likely mandatory for insurance agents to have a license. Unlicensed companies and agents cannot meet the minimum regulatory standards and might not be able to pay your claims. If an agent tries to sell you an investment instrument, ask to see his securities license and the investment's proof of registration with the Securities and Exchange Commission or state securities authority.
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Ask your agent about his background. MSN Money recommends that you only do business with an agent with at least two years' experience in the industry. If an insurance agent has a good reputation, he is less likely to commit fraud and destroy his name. If an agent gives you advice on financial planning, he should have credentials to back up his advice. For example, he may have a chartered financial consultant or certified financial planner designation.
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Request information on the compensation structure of the insurance company and how much the agent gets from the various products he sells. An insurance agent may prefer to sell you a certain product because he gets more commission from it. If your agent is reluctant to give you this information, don't work with him.
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Ask the agent about the risks of buying various insurance or investment products. No investment product comes with zero risk. If the product seems too good to be true, be careful. The agent has a responsibility to explain the product to you, according to Yahoo! Finance.
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Contact the insurance and securities authority in your state and ask them about the insurance or investment instrument your agent is trying to sell you. If the state regulators have heard of a similar scam, they will be able to alert you.
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Call any third-party that backs the life insurance company to confirm the information the insurance agent tells you. If a big corporation backs the life insurance company, you may be able to recoup any losses from any scams by suing the corporation.
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Read any form or contract carefully before you sign it. If the agent promises a certain return percentage on your investment, get him to include it in the paperwork. Don't sign anything with black spaces on it to avoid agreeing to something of which you're not even aware. Save the paperwork for future reference.
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References
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