- Dishonest life insurance agents. They may be dishonest or may not even be life insurance agents. All states require that life insurance agents register with the state, so if you think that the person you are working with seems a bit shady, don't hesitate to contact your state to see if they are a qualified agent. Complaints have been filed against life insurance agents that sell fake policies, sometimes taking up front deposits or payments.
- Insolvent life insurance companies. Make sure that you research the company selling the policy so that you know they will be in business when your beneficiaries need to collect on your policy.
- Churning (policy replacement). Some dishonest agents talk whole-life customers into turning their old policy into a new one at no additional cost - it often sounds like free insurance. However, customers find out that this isn't true several years later once the value of their older policy has been used.
You should do several things to avoid life insurance scams:
- Shop around. If an offer looks too good to be true, it probably is. Ask insurance companies about each other, and ask them about another company's lower rate
- Never sign any blank forms, and make sure that you have a full copy of your insurance policy to ensure that you are receiving the proper coverages.
- Make sure that your insurance company can answer any and all questions that you have about your policy.
- Do not pay in cash (although it sounds obvious, you'd be suprised how many people get caught with this one).
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