Insurance Scams and How to Spot Them

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There are many different types of insurance, some you are required to have by law, some are required because of a financial obligation and some you have just to make sure you do not have a huge unexpected expense. Because insurance is such a big industry, there are also many people trying to scam you on insurance. If you notice any of the following, stop having any dealing with the company or agent, report them to the Insurance commission in your state and to the Better Business Bureau in your area.

Fake Insurance Companies

Some people will rent office space, put a sign on the door and take out advertising for a fake insurance company. Usually they are hard to get in touch with after you contact them to make a claim against your policy. They will write up a policy, using another company’s forms and use it. The take your payments each month and threaten to cancel the account if you miss a payment. They know that many people never have to make a claim so they can keep collecting until someone does. Then they will leave the area. If your insurance company has suddenly moved to a new city or state but is still trying to keep you as a customer, do a bit more research on the company and check for complaints against them. If you contact your company with a claim and they never get back to you, it is time to report them.

Discount Plans Claiming to be Insurance

This type of fraud occurs when a company that is unlicensed to sell insurance sells a discount plan instead. It is very common in the health and dental insurance fields. You pay a small amount every month for your coverage. You are not actually insured, you will receive a discount from the health care provider if they accept the plan. The discount can be anywhere from 5% up to 80% depending on the plan, the provider and the treatment being done.

Agent Fraud

Sometimes the insurance company is legitimate but the agents aren’t. They may even be properly licensed to sell insurance; which makes it harder to detect. What happens is the agent writes up the policy, charges you the premiums but then never turns it in to the actual insurance underwriter. On paper, you have coverage but in reality you do not. This is hard to do for automobile insurance because of the state regulations on insurance reporting. If your agent is very good at the fraud, a false report can be sent to the DMV stating you do have the required insurance so you can register your vehicle. The fraud then becomes apparent if you are in an accident of have your car stolen. While it is not fool-proof, the best way to check on this is to check with the DMV after paying each premium to make sure the company still has you as insured. It might not catch it, but it might.

The important part of making sure you are not being cheated on your insurance is to always check and research both the company, the underwriting company and the agent before you start making payments. If everything checks out and there are no red flags, you can only hope you were vigilant enough. If you find out you have been scammed, be sure to report it so no one else gets caught in the same trouble.