Beware of insurance fraud

Pocketing Premium Payments

In the absence of payment of premium, an insurance policy is more than likely to be declared void. It is common for a policyholder to make such payments through an agent, usually the one through whom he purchased the policy. One oft-repeated insurance fraud occurs when an agent does not pay a premium to an insurance company, leaving the customer stranded without the insured risk being covered. A fraudulent agent may be found sometimes to be gambling that a client won't have a claim and makes the premium money his own.

To insure yourself against such uncalled-for risk, you can eliminate to agent from the process of paying the premium. Whenever possible, you can as well pay your insurance premiums by check or money order made payable to the company, not to the agent or agency.

Law is there at your rescue, in case a dishonest agent thus deceives you. Agents failing to turn over premium money to an insurance company are liable to lose their licenses. Agents may also be dealt with face criminal theft charges if they keep the money for their personal use.


In case of churning, an agent tries to sell an extra policy to a person already having a policy with a cash value. Churning usually occurs when an agent promises the person a new policy at a low cost. The fraud rests in the policy so meagerly priced because the rest of the premium is being drawn out of the cash value of his or her first policy. The new policy in due course eats up the cash value of the first policy.

The policyholder will be left trying to arrange for money to pay for both policies, or his or her coverage will lapse.


Unscrupulous agents try to sell you coverage you either don't want or don't need by telling you it is part of a "package". They may even totally suppress from you the extra coverage. This is a case of sliding.

Sometimes agents look to "slide" in additional coverage that carries a high commission along with the low commission coverage you are purchasing.

Among the kinds of items most commonly used for "sliding", that agents "slide" are accidental death coverage, guaranteed renewable term life insurance, or motor club membership.


More often than not, one policy covers a consumer's needs in each insurance area. However, for investment purposes some consumers may intentionally decide to buy more than one annuity or life insurance policy. Some agents try to sell you pointless multiple policies, claiming that you are in need of extra coverage. Known as tacking, this happens most frequently with life or health insurance policies.


Insurance agents generally receive their biggest commissions for the first year a policy is in effect, with lower commissions in later years. With the purpose of profiteering, some agents may "twist" the truth and press you to change policies or companies, mostly in case of life insurance policies.

However, you should be cautious about changing any of your policies, because there could be downsides. For example, health insurance policies typically don't pay compensations for illnesses diagnosed before the policy took effect. Also, some policies may have a waiting period. So, you need to take notice of all the pros and cons and weigh them properly before changing an insurance policy.

Other Ways

Disreputable agents may at times sell made-up insurance policies. While some claim to be representing the federal or state government, there are others using the license of a former or retired insurance agent.

Verify with your state's Department of Insurance to make sure the license of an agent or company by getting in touch with them by phone or online.