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Be Wary Of These Life Insurance Scams

Get second opinions to avoid life insurance or annuity scams.

Get second opinions to avoid life insurance or annuity scams.

Annuity scams are usually grouped with life insurance because fixed annuities are sold by life insurance sales people. First off, insurance is very highly regulated in each state. Agents have a duty to represent their clients even if they get paid commissions from an insurer. The vast majority of local insurance agents thrive because they do put their client’s needs first. However, the green-eyed monster named Greed seems to get the some agents like it does to people in any profession.

If you believe you have been scammed, you do have the right to seek justice. You might start with your own state’s insurance department. If that doesn’t work, an attorney may take your case. However, it is always a lot easier to stay out of trouble in the first place.

The Inappropriate Annuity Scam

Annuities might be very good products, and a way to protect your money for retirement. However, some products are just wrong for some people. You might be aware that many high-paying annuities have a fairly long waiting period before you are allowed to take out your money.

An 82-year old woman in Florida was convinced to liquidate all of her assets to purchase an annuity with high returns. The problem here was the account could not be cashed out for a decade without having to pay a large penalty for early surrender. A long waiting period is not likely to be appropriate at 82 (though it might be at 52), and that is why this is an inappropriate annuity scam.

Tip to avoid this annuity scam: Check surrender periods. Just ask your agent or the annuity company how long you have to wait to get your money back out without a penalty. If you are willing to consider a long-term investment, a longer waiting period might be acceptable. It is unlikely that many people over 80 years old want to wait a decade.

Stranger-Oriented Life Insurance Scams

This is another common scam that can actually have a negative affect on almost all of the parties involved. However, it is based upon a practice that might be legal and even beneficial for all of these people in different circumstances. Senior life settlements give senior citizens are chance to sell their permanent policies to investors. You can learn more about the good and bad of senior life settlements here.

This is usually called stranger-oriented life insurance when seniors are offered a chance to buy free life insurance policies and the chance to sell them investors right off the bat (or after a two-year waiting period). The practice of legitimately handling senior life settlements usually happens when these people already have whole or universal life policies that they have held but are in danger of lapsing.

Investors base the amount that they will offer on the senior’s health and life expectancy. It sounds rather grim, but investors want to get their money as quickly as possible. In some major cases, seniors were encouraged to misrepresent their health to sound less-healthy than they really were.

  • In this case, a broker or group offered to pay their premiums.
  • They also might have promised the senior citizens a chance to keep part of the death benefit as free life insurance (the group paid the premiums).
  • The idea was to sell the policies to investors after the waiting period, but the investors would base their offers off of false information.

See, the practice of stranger-owned life insurance is not always a life insurance scam, and it is legal in some states. But it is illegal if anybody misrepresents any information. Some seniors may have knowingly or unknowingly gotten in trouble when they were caught.

Life Insurance For A Dollar?

This is not really a life insurance scam, but it is pretty aggressive marketing. Some very large companies offer a dollar a month life insurance policy, but that policy is not going to cost one dollar a month forever. That might be the premium for the first month or even first three months. After that, the price will go up to what it should be, and it might even be more expensive that other policies that simply charge a reasonable premium in the first place.

How To Avoid Annuity And Life Insurance Scams

If you plan to engage in a large life insurance or annuity transaction, it is important to rely upon a broker that you feel comfortable with. It is unlikely that agents who are part of your community are going to do anything shady in order to make a quick buck. However, it is not impossible to find a broker who gets tempted to cross the line out of greed.

You can always call your state insurance department or do some research online on any products you consider. For example, BestRatesUS.com helps people get the best insurance rates by informing consumers about popular products. You night also call upon some competitive agents or insurers to see what they think of the offer that you got. If you plan to invest a lot in any financial product, a second opinion can be enlightening.

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