Term Life Insurance Articles
How Fraud Affects The Costs Of Term Life Insurance Policies
2010-12-09
A term life policy can be an excellent way for anyone, young or old, to secure a future for their family should the unthinkable happen. For parents, having a robust term life policy, especially if one parent works in a job with high risk, means that their children and spouse will be protected in the event that something happens to them. For young adults, getting a policy early and for a long term can mean that they will be covered for years at a very reasonable cost. As term life insurance is a form of insurance that pays out only once, upon death, one would think that fraud has less of an impact on this sector of the insurance industry. In fact, term life fraud can lead to a number of issues for agents and consumers alike.
The most important result is, of course, increased cost. When insurance companies pay out fraudulent claims or are the victims of fraudulent activity, they seek to recover their costs by charging all other consumers more. This may only be a few pennies or dollars a month, but with enough fraud occurring it can add up to a substantial amount. Term life fraud will usually take the form of a client lying about a pre-existing condition, faking a medical exam, or in extreme cases faking a death in order to collect on a term life policy. While this is less common than fraud in the auto insurance industry, the amount of money being portioned out is often far higher, and this can lead to substantial increases in cost.
Term life fraud also has an effect on relationships between clients and brokers. While it is important to maintain a distance between agent and client, it is also imperative that a level of trust be established in order to come to a mutually beneficial agreement for both parties. A company that has seen a great deal of insurance fraud will be naturally suspicious of its customers, even those that are perfectly honest. This can lead to resentment on the part of customers, fostering more suspicion by agents. Things such as medical exams and policy waiting periods help to limit this frustration, but it can be difficult on both sides of the insurance fence once fraud becomes a serious issue.
On the client side, committing insurance fraud is a terrible idea that can lead to fines, jail time, and no insurance to cover a family in need. From the agent's perspective, too much suspicion can ultimately lead to a loss in clientele as they become frustrated by constant scrutiny and the notion that they are attempting to commit term life policy fraud.
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A term life policy can be an excellent way for anyone, young or old, to secure a future for their family should the unthinkable happen. For parents, having a robust term life policy, especially if one parent works in a job with high risk, means that their children and spouse will be protected in the event that something happens to them. For young adults, getting a policy early and for a long term can mean that they will be covered for years at a very reasonable cost. As term life insurance is a form of insurance that pays out only once, upon death, one would think that fraud has less of an impact on this sector of the insurance industry. In fact, term life fraud can lead to a number of issues for agents and consumers alike.
The most important result is, of course, increased cost. When insurance companies pay out fraudulent claims or are the victims of fraudulent activity, they seek to recover their costs by charging all other consumers more. This may only be a few pennies or dollars a month, but with enough fraud occurring it can add up to a substantial amount. Term life fraud will usually take the form of a client lying about a pre-existing condition, faking a medical exam, or in extreme cases faking a death in order to collect on a term life policy. While this is less common than fraud in the auto insurance industry, the amount of money being portioned out is often far higher, and this can lead to substantial increases in cost.
Term life fraud also has an effect on relationships between clients and brokers. While it is important to maintain a distance between agent and client, it is also imperative that a level of trust be established in order to come to a mutually beneficial agreement for both parties. A company that has seen a great deal of insurance fraud will be naturally suspicious of its customers, even those that are perfectly honest. This can lead to resentment on the part of customers, fostering more suspicion by agents. Things such as medical exams and policy waiting periods help to limit this frustration, but it can be difficult on both sides of the insurance fence once fraud becomes a serious issue.
On the client side, committing insurance fraud is a terrible idea that can lead to fines, jail time, and no insurance to cover a family in need. From the agent's perspective, too much suspicion can ultimately lead to a loss in clientele as they become frustrated by constant scrutiny and the notion that they are attempting to commit term life policy fraud.
