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Life Insurance Scams: Churning

Life insurance is a vital part of your long-term financial plan, especially if you have people who are depending on you for their care, like children or ailing parents. Obviously you want to leave these relatives and family members with some sort of financial assets after your death. They can use this money for your funeral, the execution of your estate, or for daily expenses.

For older Californians who may be living on a fixed income, purchasing a life insurance policy is a way to provide support and assistance in your family’s time of need, even if you cannot physically be present. But for insurance providers, life insurance policies do not hold the same appeal. Agents make commission on their policies, and use the policies’ premiums and associated costs to bring in profits for their companies.

If you are working with an unscrupulous agent, you may be offered a number of tantalizing sales pitches that could land you a fraudulent policy. One such scheme, known as churning, is gaining popularity, and it particularly affects older policyholders.

What is Churning?

Churning is when an insurance agent deliberately misrepresents his products, or uses falsified figures and inaccurate claims to convince an existing customer to purchase a new policy with the same insurance provider, typically at a so-called lower rate or payment. Churning is a deceptive scheme that targets consumers whose policies have been in existence for a long time, and are no longer bringing in lots of money for the providers.

In a churning scheme, a victim may not realize that he or she could lose everything—the cash savings in the original policy and the full value of the policy itself. They may simply hear their insurance advisor offer them a great deal. But in reality, a churning scheme involves taking the cash savings on an existing policy and using it as a loan to pay for the new policy. Every time a payment is made on the new policy, the cash decreases in the old policy, and reduces the total value of the life insurance that will be received. Once the cash is gone, the old policy lapses, leaving the victim with no coverage.

Investigate Your Insurance Policies

Even if you have been with your insurance company for a long time, you may still be susceptible to a churning scheme, especially if you have small, cash-value insurance policies that are almost paid up. Your agency may be offering you what sounds like a great deal—a brand new policy, with more coverage and less cost. But nothing really comes for “free,” or even “cheap,” in the insurance world. You should be aware of what you’re paying for and where the money is coming from to provide that low initial price.

If you suspect that your company has “churned” you an insurance policy, or that you may be getting manipulated to lose your existing policy, get one of our financial elder abuse attorneys in Alameda County involved now. At the Evans Law Firm, Inc. our attorneys represent clients who have been victims of all kinds of financial elder abuse, including fraudulent schemes for selling insurance policies. To discuss your case, contact us online, or by phone at 415.441.8669.

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