How to Spot an Insurance Scam

The insurance scam is, at its heart, straightforward robbery. The great thing about it (for the scammer, not you) is that they don't just steal from you once and run away. They get to keep stealing from you every month in the form of monthly payments, and if they're lucky -- and there's a good chance they will be -- you'll never even know.

Let's face it: most people don't need to use insurance very often. If it's something like medical insurance, then yes, you'll need it for common things like doctor visits and medication. But car insurance, home insurance, life insurance? These are the big ticket items that we hope we'll never need.

And most of us don't. Most people are not in car accidents, don't have their homes burn down, and don't die in tragic accidents. That's how insurance functions. If everyone needed to claim on large policies, you'd be paying a lot more. Your smaller payments cover the few people who make big claims.

Why discount insurance isn't the "deal" it sounds like...

Even though most of us won't need those big insurance policies, we know we have to have them (legally, in most cases). But we don't want to pay huge insurance premiums for a service we may never use. For that reason, many people seek out discount insurance -- and that leads them straight into insurance scams.

If you get scammed, you get peace of mind -- until something goes wrong. Then you suddenly realize you've been paying an insurance scam for no reason whatsoever. To avoid this, here are some ways to spot insurance scams.

1. Watch for deals that are too good to be true. Now don't get me wrong: not only is it okay to compare insurance rates, it's sensible. You may very well find that some companies offer better deals, good rates for combined policies, and the like. But you'll also find that most insurance premiums are fairly comparable.

If you find an unbelievably good deal, well, maybe you shouldn't believe it -- at least not right away. Check up on the company, ask for references, and find out why exactly their insurance premiums are so low.

2. Actually read your policy. I know, it's about as exciting as watching paint dry -- and that's what they're counting on. Read the fine print and look for loopholes or exceptions that could mean they don't have to pay you in an emergency situation.

3. Ask questions. Legitimate insurance companies can answer them. They can also do things like give you receipts for your payments, and they're not afraid if you mention the word 'lawyer.' Insurance scams, on the other hand, often have no idea about what's in the policy, don't want to give receipts, and will break out in a cold sweat if you mention having a lawyer take a look over your policy.

These three simple tips could keep you from becoming an insurance scam victim.

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