If you are looking for life insurance, you need to make sure that you get a quality, competitively priced product, and do not fall for a life insurance scam. So how do you know what is for real, and what is not? Here are some tips:
Run for the hills if you hear about “Stranger-Owned Life Insurance”
You are only allowed to take out a life insurance policy on someone if you have an “insurable interest” — whether it be some familiar or financial connection. Stranger-Owned Life Insurance is an investment vehicle that tries to get around that rule, but the insurance company may not pay out on it. The way it can also work is that investors approach seniors to take out life insurance policies on themselves, offering to pay them some sort of then incentive. The seniors are supposed to turn over the policy to the others after two years. At any rate, this is a bad idea.
Beware of “twisting”
Some life insurance agents may inflate your listed income and net worth for annuities. Instead of you keeping several smaller annuities that could fit your life and your money, the unscrupulous agents may pack or twist all the annuities into one large one. Then sometimes, these annuities are too big, and too expensive, for the person, with huge premiums, and rules that could prevent the person from taking out the money for many years. Be very careful if your insurance agent wants to do such a thing.
Stay away from “churning”
Some bad agents will try to get senior citizens to sign up for annuities, or cash in their old annuities for new ones, promising them bonuses, so that the agents get big commissions. This practice is known as churning. Unfortunately, many times the seniors do not get the bonuses – but they do get stuck with annuities they cannot access. In addition, new annuities are not recommended for seniors over 60, because they generally cannot access the money for as long as 15 years without paying big penalties.
Watch out for “bait and switch”
Be very careful that whatever life insurance policy you buy is as promised. Sometimes people have been sold term life insurance policies, only to be given whole life insurance policies. Other times, they are promised one rate, but the policy has a more expensive rate. Lesson learned – read the fine print carefully before signing up for any life insurance.