Insurance  is one of those necessary expenses in life. Perhaps we don’t like to see hundreds of dollars every month go towards premiums that we may not have submitted a single claim on (I don’t know about you, but I am grateful to not have submitted a claim on several types of the insurance we carry!), but if we want to keep our standard of living as well as protect others, we need to carry a multitude of insurance policies. At last count, our own insurance  costs each month come to approximately $600, which includes health insurance  (dental and vision), homeowner’s insurance , auto insurance  for two vehicles, long-term and short-term disability.
Shopping around  for comparable insurance offers is a great way to cut expenses in this area of your budget. I typically do this once per year, and while it does not always work out, it does leave me satisfied that I am getting the best market rates at the time.
It turns out that there are real scams out there when it comes to insurance, scams that I had no idea about until I started to do some research. These scams come from both consumers—which means that all of our premiums are raised to cover the costs—as well as insurance businesses themselves. Here are some insurance scams you should watch out for:
- Being Sold Unauthorized Insurance Policies: Typically it is illegal to sell insurance without a license. Unlicensed companies are more prone to sell you phony insurance that does not meet the state minimum financial requirements and the company itself may not have the financial resources to pay any claims. In this scheme, the company generally will pay out a few small claims (if you ever have any), but once you submit for a larger claim or several claims at once, the company vanishes and leaves you with no coverage and potentially expensive bills to pay.
- Swoop and Squat Car Scheme: This one involves two cars that essentially make you get into an accident. There are two partners in two separate vehicles; one behind you, and one in front of you. The “squat” car slows down in front of you, and the “swoop” car speeds up to swerve in front of the squat car (to make it appear that there is a reason for the swoop car to slam its brakes, causing you to rear end them). The swoop car flees the scene and you are stuck with insurance claims to deal with or worse, damage/deductible to pay out of pocket.
- Sale of Unauthorized Health Insurance to Your Business: Small businesses, and businesses that are hard to insure are open to fraud by health insurance companies. The health insurance provider may be unlicensed, or claim that they are exempt from state regulation because they offer “self-funded” or “ERISA” (Employee Retirement Income Security Act) federal plans. ERISA plans are exempt from most state laws, but they are typically created by a business itself and not from an outside company or agent.
Avoiding Insurance Scams
To avoid falling for an insurance scam use the following tips:
- If your insurance premiums are significantly lower than those being offered by other companies, then do some due diligence. Premiums are based on the pool of unique insurers each company has, so you will see fluctuations in the market (which is to your advantage!). However, large fluctuations, or policy premiums that seem too good to be true should be questioned.
- Check the license of your insurance company. Make sure you know the precise name of the company, as unlicensed companies will generally use very similar names to familiar insurance agencies to thwart suspicion from consumers.
- Ask for an itemized bill when you visit the doctor or go to a hospital (our insurance company sends this into the mail to us, so yours might as well). Go line-by-line to see if anything suspicious has been billed, or tests ordered for which you never had done. If you have questions, call the doctor/hospital accounts department. Also see How to Save Money by Fixing Health Care Errors .
- Pay by check or credit card so that the payment can be traced somehow (the date, name of the company, and amount paid). In the event of fraud, using a credit card  could get you a refund from your credit card company (subject to its terms and conditions).
- Verify a company’s physical address, specifically if they are selling policies over the phone or door-to-door to you.
- Be wary of insurance policies being offered to you through unsolicited emails.
Have you ever been a victim of insurance fraud, either from a person or from a company?
More on Insurance
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- How to Prevent and Deal With Insurance Claim Problems 
- How to Obtain High Risk Insurance 
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- How Much is the Penalty for No Health Insurance in 2014? 
- What is the New Health Insurance Premium Tax Credit? 
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