Six Ways to Fight Life Insurance Fraud
ALBANY, NY (08/08/2012)(readMedia)-- Circumstances are often dire when someone contemplates faking death. The recent case of Raymond Roth, whose son reported him missing last week, highlights the need to be ever-mindful of life insurance scams, warns the New York Alliance Against Insurance Fraud (NYAAIF).
Having tripled his life insurance policy, lost his job, and put his home up for sale, Raymond Roth "vanished" off the coast of Long Island. His son promptly reported him missing, and a helicopter search ensued to find the "drowned" father. He was found the next day speeding in South Carolina.
Jonathan Ross was arrested on Monday for helping his father in what is looking increasingly like a life insurance scheme.
"Life insurance schemes are varied, but there's often one common denominator: they are costly and dangerous," says Jack Houston, NYAAIF Chairman.
In another recent case, a Georgia businessman's wife was charged with orchestrating his murder so she could allegedly live with her lover using his life-insurance payout.
"Committing fraud is not going to fix any of your problems," warned Jack Houston. "It will only make things worse for you and your loved ones."
In Chicago, Russell Wasendorf Sr., chief executive of a failed brokerage firm, had $6.9 million in life insurance and a debt on his private jet when he attempted suicide last month.
The NYAAIF also warns consumers of schemes initiated by insurance agents. Though normally honest, some life insurance agents may scam policyholders in exchange for higher commissions.
The NYAAIF offers consumers 6 key tips for fighting life insurance fraud:
- Know that these scams increase the cost of your insurance policy
- Be careful of someone taking out a policy on your life
- Don't try to fake your own death, it's not worth it
- Beware of "churning and twisting schemes"* by insurance agents
- If you hear or suspect any type of insurance fraud, report it immediately
- Don't encourage or assist anyone thinking of committing fraud; when the scheme unravels, you will face grave consequences too.
"Learn the signs of insurance fraud and the steps for prevention...You've got to know it to stop it."
The New York Alliance Against Insurance Fraud is a non-profit organization that seeks to increase public awareness about insurance fraud and its consequences. Membership includes more than 100 insurance companies writing policies in New York State.
* More on Churning and Twisting Schemes:
The vast majority of insurance agents and companies are ethical, honest and trustworthy. But crooked agents and bogus insurers do exist, and they can fleece you. Some will sell coverage you don't want or need. Maybe the coverage is real, but it's expensive, unnecessary, and your current policy may already cover that risk. Three examples:
Churning: Dishonest agents might convince people to use the built-up value of their current whole life policy to buy a "better" policy even though their present life coverage is perfectly suitable. The agent gets a nice commission, but you must start building up cash value all over again.
Sliding: An agent or insurer slips you extra coverage you didn't ask for - but do pay for. This can easily add $100, $200 or more to your premium. The agent cheerfully says it's simply part of a "package," or doesn't tell you about the coverage at all. Motor club memberships, accidental death coverage and guaranteed renewable life insurance are three policies that crooked agents sometimes sell to unwitting policyholders.
Twisting: An agent may urge you to change policies prematurely by "twisting" the truth about the downside. If you have an illness, injury or other medical condition, for example, will that "affordable" new health policy refuse to cover it because it's a pre-existing condition?