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Life Insurance Fraud


fraud is a black eye on both companies and customers. Both parties have been guilty of fraud and will be again – especially since, sadly, fraud seems to be on the rise according to most statistical measures.

Research by the non-profit The Coalition Against Insurance Fraud concludes that fraud committed by all parties costs an average household $ 1650 per year and increases premiums by 25%.

Life insurers are most often guilty of insurance fraud in the form of their agents doing "churning". This is where the agent seeks to cancel your existing policy and replace it with a new policy that is paid for by the "juice", or cash value, in your existing policy. Agents do this to earn more commissions for themselves without having to seek new prospects for business. Churning can result in increased premiums for a customer and clearly costs them out of their cash value.

Another insurance fraud practiced by agents, however, is called "windowing". This is where, being unable to attain a client's or applicant's signature on a necessary document but already having that signature elsewhere, the agent holds up a signed document behind the unsigned document, presses it against a window to make the light shine through, and traces over the signature with a pen in order to forge the signature of the client or applicant.

When big name insurance companies have their agents do bad things it makes big headlines, but the fact is that the public is far more guilty than insurance fraud than companies are. And of course making false claims is the thing that they do the most, which is why all claims on death benefit payouts are subject to investigation.

But falsely striking background or financial income information is another form of insurance fraud often engaged in by consumers. They may be embarrassed by their medical history or income, or they may realize that if they tell the truth they will have their coverage diminished or their promotions will be very high. If a company finds out someone lied on their application they have the right not to pay the claim or not pay the full death benefit depending on the circumstances and the policy.

But there are things that buyers of can do to protect them against insurance fraud, since they do not have the great investigative resources that companies do.

Remember, when it comes to , if it sounds too good to be true, it probably is. There's no free lunch.

Save all of your paperwork, including getting receipts for every penny you give your agent, and never ignore any notifications from your company.

is never free and it's not a pension plan, although certain policies can indeed become self-financing – but they never start off that way.

Never buy any coverage that you feel is often unnecessary, never let yourself be pressured, and never borrow to finance .

Although it can be part of an investment portfolio, 's number one role is protection against the unforeseen – and most people do not need in their later years. It is intended to be temporary.


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