Life Insurance and Misrepresentations

The majority of life insurance agents and consumers who purchase the product do it on the up and up.

For those instances, however, when either the agent or consumer is trying to pull a fast one, be prepared to look for potential signs that make the sale a bit fishy.

As most people know, life insurance is coverage to help cover your loved ones financially following your death. This is especially true for those loved ones who depend on you for income.

Those few selling life insurance who are looking to make money off of consumers are the ones who use deceptive or illegal tricks to hide the true nature of their products.

So, how can you as a consumer be prepared for such shortcomings?

First, one of the more typical deceptive life insurance sales tricks is simply known as misrepresentation.

This practice can include a number of factors, including any false or misleading details regarding the policy's terms, conditions, nature of the policy, extent of insurance coverage, amount of interest to be paid to the insured and more. The term also encompasses any false details regarding other insurers that the company might put into play in order to get you to switch policies.

As you can probably imagine, misrepresentation is against the law when it comes to both the federal and state books.

The best way to look for misrepresentation is to keep an eye out for anything on the contract that looks funny prior to signing it. Be sure the document contains the real terms; otherwise the insurer is not able to legally enforce them.

Secondly, beware of churning, which means an agent is trying to get you to replace or modify your current life insurance policy with a new one and at a greater cost. If you have to reapply, you're looked upon as a new policyholder and you are judged due to your present age and health. This is different from your age and health when you applied for your original policy.

Also be on the lookout for low face value life insurance.

This is the scenario where you have any policies where benefits are less than a multiple of premiums. The policy will ask the consumer to pay more then it will in actuality ever be worth.

The strange thing here is this practice is not against the law in every state.

The best defense is to consult one's state's attorney general prior to reporting this practice to the authorities.