To learn if a life insurance company or agent is legitimate requires using resources that can give you an unbiased view of these entities. Some of these may include your state department of insurance, feedback from friends or forums, and ratings reviews from independent industry analysts.
People seeking insurance differ widely on their views as to what constitutes a “scam” or a dishonest company. Some individuals may consider standard insurance procedure as cheating, while others might only be concerned about blatant disregard for the law.
Take a look below at some of the ways to judge the legitimacy of a company or agent and some of the resources that will help you do so and then be sure that you do your homework to find the best insurance. Enter your zip code in at the top of this page to compare free life insurance quotes from many different companies!
Identifying Predatory Insurance Practices
The first step in analyzing your new insurance company is to determine whether they are a well-respected agency or company that follows state law, or if they are considered “predatory insurance companies.” The term predatory means companies that are either full scam operations or that break or bend the law in an effort to extort as much money as possible from insured individuals. Predatory insurance practices differ slightly from predatory lending practices. Crooked insurance companies or agents may try to sell expensive life insurance policies to individuals who cannot afford them. These predatory companies may also misrepresent themselves or their services, just in an attempt to make you sign a binding and unfair contract.
Predatory agencies and insurance companies may attempt to steal your premiums or sell phony insurance policies that cover nothing. Blatant lying in this business is not as rare as “twisting the truth.” Therefore, you must also beware of companies that offer legitimate services, but actually specialize in selling you contracts that you don’t need. Many insurance companies and agents try this move. They convince you to buy a policy you don’t need, and you end up paying outrageous premiums.
Your state department of insurance will have records on any insurance companies that have poor records in this regard.
Dishonest or Unethical Insurance Tactics
A dishonest agent may use tactics like churning, which is convincing you to use the built-up value of a life insurance policy in order to buy a superior policy. Why buy what you don’t need? Though this isn’t illegal, it’s not exactly honest. It’s one thing to offer a better policy—but to use persuasion and try to convince the insured that he or she needs a policy that will hurt in the long run, is dishonest practice.
Sliding is another tactic frequently used. In this instance, an agent attempts to give you extra coverage, which you did not agree to. This can inflate your premiums in a hurry. This is absolutely not fair. The agent has an obligation to give you a final price quote on all services. Make sure that you ask the agent if the new policy is a part of a “package.” Unless the agent explicitly says it’s a package deal, then you are paying only for your requested policy. To “slide” in another policy at the last minute would be illegal practice.
Hiding the downsides of a new contract is also unethical practice. A good insurance agent isn’t reluctant to tell the truth. He or she should want to earn your respect as a straight shooter that gives you all of the facts before you come to a decision. Lastly, beware of agents that try to convince you to invest in risky contracts that involve promissory notes. Unless you are specifically looking for investment strategies, this type of policy is usually not needed for traditional life insurance protection.
The best way to evaluate an agent is by word of mouth from people you trust. If a family member has an agent they have stuck with and trust for years, this is a good sign. Of course, you should also trust your own instincts and run from any agent that you are not comfortable with for any reason.
What Can I Do to Protect Myself from Crooked Companies?
The first and easiest step to take is to search for your insurance company online. Do a Google search and perhaps add the word “rip off” just to see if any complaints come up. You should also try searching the Better Business Bureau to see if there are any formal complaints filed. You can also contact your state insurance department to verify that the company or agent is licensed and in good standing with your home state. You can also search for the company’s rating from a well known organization like A.M. Best, Moody’s, Standard and Poor’s or J.D. Power.
Be very suspicious if your agent tries to convince you to pay premiums in cash or to write checks over to a personal name rather than an insurance company. In general, agents and insurance representatives that are “legitimate” are confident, cordial and can explain a policy very clearly. Agents or representatives that seem evasive or unsure about their policies should be approached cautiously. If the agent behaves suspiciously or suggests you should do something that you are not comfortable doing (such as upgrading to a more expensive policy) than try to get a second opinion.
If you have not received a policy within 60 days after filing, contact the insurance company directly, not the agent. In general, be suspicious of any agent that offers you an unusually low price. If it’s 30-50% less than the industry standard for your area, you may be missing out on an important part of coverage. Research why there seems to be a discrepancy and get a second opinion. Lastly, secure a copy of every form you sign. Make sure your agent gives you all the paperwork you need, including installment payments, and the itemized list of what each premium covers.
Most insurance companies are legitimate in that they are ethical and legally established. However, there are some unscrupulous companies out there that should be avoided. Look up legitimate life insurance agents and providers in your area using an insurance rate quote tool. You can use this free comparison tool by entering your zip code in right now!