Home insurance scams are everywhere in the U.S. It’s when people pose as legitimate insurance agents to sell policies that are too good to be true. You may think that homeowners insurance scams are easy to spot, but in most cases, victims won’t find out that they’ve been scammed until they file a claim.
Buying insurance with these fraudulent insurance agents puts you and your family at risk. In this article, we’ll take a look at how you can spot a shady insurance agent and avoid this type of insurance fraud.What are some common insurance scams?
Fraudulent insurance agents have a few tricks up their sleeves that you should be aware of. Let’s take a look at some of the common homeowners insurance scams:
Scam #1: The Ghost Broker
Ghost brokers are insurance agents that apply for a policy on your behalf, ask for your premium payment, and then cancel your policy without your knowledge. They end up pocketing your premium without you suspecting a thing.
They’re usually on social media sites, advertising policies that are too good to be true. Their rates are often lower than the average rates.
Scam #2: The Fake Broker
This insurance agent isn’t an agent at all — they’re just pretending to be. Fake brokers aren’t licensed to sell insurance within the state, hence, they typically target customers who aren’t likely to check their legitimacy.
Fake brokers are experts at creating fake documents that look genuine. Hence, it’s best to research whether or not the insurer they’re representing actually exists.
What are the signs of a fraudulent insurance agent?
While the insurance industry has honest agents and brokers, it also has a handful of dishonest intermediaries. Wondering how you can tell if your insurance agent is trustworthy? Here are seven signs that your insurance agent or broker is up to no good.
#1 They pressure you into buying a policy
Be on the lookout for agents who push you into buying a homeowners insurance policy. They will say something along the lines of, “This offer will be gone in two days. What are you waiting for? Get it before it’s gone!” They may also call or text you nonstop to ask if you’ve made your decision. Ideally, you should have enough time to think about your coverage options.
#2 They ask for direct payments
Premium diversion is when an insurance professional pockets the client’s premium instead of sending it to the underwriter. This type of insurance fraud is a form of embezzlement. An ethical insurance agent wouldn’t ask you to pay them directly. If you need to leave the check with them, be sure to ask for a receipt. You should always verify if your payment was remitted to your insurance company.
#3 They offer very low premiums
While premium rates vary from one insurance company to another, they’re rarely ever too good to be true. Premium rates will always be realistic. Hence, if your insurance agent or broker quotes an unbelievably low premium, you should be skeptical. You’re likely being sold an insurance policy that doesn’t exist at all.
#4 They add coverages you didn’t ask for
Always remember that you’re in control of your coverages. If your insurance agent or broker adds coverages that you never discussed with them, they’re likely after the commission. This is because their commission depends on your premiums. Hence, if you pay more, your insurance agent gets more.
If your insurance agent tells you to buy all of the additional coverages, find another agent. Ask your property manager to help you identify the coverages that your home needs.
#5 They don’t have an address
A legitimate insurance agent should be able to provide you with their address, business phone number, and email address. If they contact you using their personal number (or worse, their Facebook account), think twice about buying your insurance policy from them.
#6 They represent an unfamiliar insurance company
If they collect premiums on behalf of an insurance company you’ve never heard of before, trust your gut and do your research. Unfamiliar insurers are often nonexistent insurers — shady insurance agents just know how to make fake documents look real. When in doubt, contact your state’s insurance department to ensure that the insurance agent is licensed.
#7 They fail to give you a copy of your policy
You should receive your policy documents within thirty days of paying your premium. If your insurance agent fails to provide you a copy of your policy, contact your insurer immediately. Some shady insurance agents will send the insurer the premium for a cheaper policy even if you paid for a more expensive policy.
#8 They’re hard to reach
Fraudsters don’t want to list their phone number because they don’t want to get caught. That’s why they’ll ask you to communicate with them on social media (probably using a fake account) or through email. If you’re having a hard time communicating with your insurance agent because they insist on those modes of communication, find another agent.
What’s the best way to avoid being scammed by an insurance agent?
Does your insurance agent seem shady or sketchy? Here’s what you should do according to the National Association of Insurance Commissioners (NAIC):
- Contact your state’s insurance department to verify whether the insurance agent is licensed in your state and if they’re legitimate insurance agents.
- Don’t sign anything unless you’re 100% certain that they’re licensed to sell insurance.
- Don’t make direct payments especially to agents who only accept cash.
- Ask for their details such as their business address, business phone number, and business email. Beware of insurance agents who reach out to you on social media.
- Hire a property management company that has connections to reputable insurance agents and insurers in your area.
The bottom line
The last thing you want to happen is to file a claim, only to find out that your policy was never in place. Protect your property and your finances by getting insured with a real insurance broker.
At Luxury Property Care, we’re here to help you find the right policy, identify your coverages, and negotiate premium rates on your behalf. Our property managers will make sure that you’re putting your hard-earned money in the right place. We’ll keep the fraudsters away.