6 Ways to Protect Yourself From Insurance Scams
Statistically speaking insurance is probably one of the safer areas of the financial world, but it is not void of issues with fraud.
The main problems regarding insurance fraud from a consumer’s standpoint are social security numbers, phony insurance policy placement, and phishing scams.
The issue with your social security number can be solved due to new federal regulation by freezing your credit for free.
6 Ways to Protect Yourself From Insurance Scams
Lookup Agent Licenses
The first place to start whenever you start working with any new insurance agent is to lookup their insurance agent license.
All legitimate agents and brokers in the US are licensed. The best place to look up insurance agent license information is on your state insurance regulator’s website.
If during this process you discover that their license has been suspended or does not exist, move on.
Getting and maintaining an insurance license is not difficult and if the agent does not have this, then they are unlikely to be able to properly assist you with your insurance placement, let alone be able to even provide you a real insurance policy.
As a secondary concern – each state tends to break up licenses into multiple types, such as property, health, life, etc. This can be a bit awkward and difficult to understand.
Protect your Social Security Numbers
Twenty or thirty years ago most insurance companies required social security numbers on all insurance applications, but times have changed.
Many states have new regulations such that some property and casualty insurers no longer require them.
However, most property and life insurers still require social security numbers.
Another thing to consider is to hold off sharing your social security number until you are ready to purchase.
In other words, don’t give you’re your social sec number out just for a quote.
Tell the agent that you would prefer handing that out at the end. A good insurance agent won’t be too surprised by this request.
I might not be a popular insurance agent for saying this, but the only effective way to really protect your social security number is to totally freeze your credit.
There has been recent new federal legislation concerning this and everyone in the US can now freeze their credit file for free.
The main issue with freezing your credit then becomes unfreezing it once you need to gain access to them.
For a full guide to freezing your credit – check out the Clark Howard guide – which is amongst the best on the web.
Be Careful Writing Checks Directly to Insurance Agents
You should insist on writing out payments for insurance to the name of the insurance company only. Although there are rare situations when may have to break this rule and write a check.
Usually, for a very specific type of insurance out to an agency or agent, this is not at all common.
If an insurance agent requests that a check is made out into their name, proceed with caution. Consider calling the insurance company directly and inquiring yourself if you can pay them directly.
If the only way to proceed is by writing a check directly to the agent, I would consider inquiring to see if they have a fidelity bond.
Always Check Financial Strength Ratings
Although this suggestion may not technically be prevention against insurance fraud, it’s a great practice whenever you purchase any form of insurance, and can still be considered protection about buying insurance from a poor candidate.
Insurance in the United States is regulated by various governmental state agencies. However, their financial situation is rated by four private rating agencies that are not affiliated with the government.
These rating agencies each have their own rating system, with insurance specialist AM Best being the easiest to understand.
AM Best rates insurers with their Financial Strength Rating metric. In general, consumers should aim for A- and higher.
Especially when buying any form of cash value life insurance such as whole and universal life and when considering annuities, it is imperative that you independently check all insurer’s rating.
Don’t Trust Phone Calls and Be Careful of Websites
Any article about protecting yourself from insurance scams would not be complete without a section warning you about random phone calls and sleazy websites. Just because someone calls you and tells you something does not mean that it is true.
In general, if something is important enough an official notification will come in the mail. An insurance underwriter will never call you requiring that you divulge your social security number and bank account information.
If an insurance company does send you a letter requesting more information, contact your agent immediately and check in with them to confirm its authenticity. If you do get a call requesting sensitive information, tell them to send a letter and just hang up.
The same goes for websites and emails. Be extremely careful about sharing any information online. Unless you have signed up for online billing – an insurance company will usually not email you require more information.
As with all types of email scams – watch what you click on. When in doubt – Check it out.
Sum it All Up
Sadly there is not one guide that can completely protect yours from any type of fraud, insurance or otherwise. However, if you follow these simple rules you will be much safer.
Author Bio: Scott W Johnson is the owner of Whole Vs Term Life Insurance, which is a site dedicated to assisting consumers in understanding the Buy Term and Invest the Rest concept. Scott lives and works in California where he writes about insurance and consumer rights.