Insurance Sales Scam

Stealing your premiums - An agent pockets your insurance premiums instead of sending it to the insurer. Crooked agents may steal your premiums to support their business, feed a gambling or drug habit, or buy luxury goods such as cars or jewelry.

Selling phony insurance - An agent or company rep sells you fake coverage from a phony insurance company. Or the agent sells you bogus coverage using a legitimate company's name, or a name that's similar to a legitimate insurer. You might receive an official-looking policy or proof of insurance that's worthless. You could lose thousands of dollars if you suffer a loss and don't have a real policy to pay your claim.

Selling coverage you don't want or need - Maybe the coverage is real, but it's expensive, unnecessary, and your current policy may already cover that risk. Three examples:

• Churning: Dishonest agents might convince people to use the built-up value of their current whole life policy to buy a "better" policy even though their present life coverage is perfectly suitable. The agent gets a nice commission, but you must start building up cash value all over again.

• Sliding: An agent or insurer slips you extra coverage you didn't ask for, but do pay for. This can easily add $100, $200 or more to your premium. The agent cheerfully says it's simply part of a "package," or doesn't tell you about the coverage at all. Motor club memberships, accidental death coverage and guaranteed renewable life insurance are three policies that crooked agents sometimes sell to unwitting policyholders.

• Twisting: An agent may urge you to change policies prematurely by "twisting" the truth about the downside. If you have an illness, injury or other medical condition, for example, will that "affordable" new health policy refuse to cover it because it's a pre-existing condition?

Worthless investments. You may be urged to invest in insurance-like instruments. One is viaticals, which are investments in life policies taken out on sick or terminally ill people. Viaticals can be a legitimate investment, but some can also be phony or misleading. Another scam is promissory notes, in which agents promise quick, high and certain returns for investing in promissory notes supposedly backed by insurance. Often the promissory notes don't exist, they're just a sham to steal your money.