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Avoiding Life Insurance Company Deceptive Practices

When it comes to finding the right life insurance company, you want to be able to assume that any company you choose will be honest and will treat you fairly. Unfortunately, this is not always the case, as some life insurance companies put their own profit ahead of the welfare of their clients. As such, they may engage in some unscrupulous activities in order to win over new clients as well as to avoid having to pay out on a valid insurance claim. In order to keep yourself protected and to ensure you choose the right life insurance company, there are several things you should watch out for as you search for the life insurance company you want to work with.

Misrepresentation

Perhaps the most deceptive practice a life insurance company might use is that of misrepresentation. Misrepresentation involves providing misleading or false information about the conditions, terms or extent of coverage provided by the policy. It is important to note that misrepresentation is illegal under both state and federal law. In order to make certain you do not fall victim to misrepresentation, make sure you read through your contract carefully before you sign it.

Churning

When a life insurance company or agent tries to persuade you to replace your current life insurance policy or to substantially increase your coverage, it is referred to as churning. Churning is a deceptive practice because the insurance agent is generally just trying to get you to pay a bigger premium and to pay the fees that are associated with reapplying to a life insurance policy.

Rolling it Over

An agent may try to convince you to "roll over" the cash value of your life insurance policy in order to avoid paying premiums. While this may work for a few years, your interest rates will eventually change and you will eventually run out of roll over cash. In the end, you will be paying larger premiums than you were paying before. An insurance agent who fails to mention this fact is breaking both state and federal laws.

Requiring Coverage

In some cases, a life insurance company will work with a credit lender in order to force you to purchase coverage. In these situations, the lender may include the life insurance policy and its premium costs into your loan contract and its payments.

Low Value

Another unscrupulous practice that your life insurance company may implement involves asking you to pay more for the coverage than it is actually worth. In other word, the benefits are less than a multiple of the premiums you pay. Depending upon your state, this practice may not be illegal. Still, any life insurance company that engages in this practice is certainly one that should be avoided.