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California Life Insurance Lawyer for Fraud and More

The Lowdown on Life Insurance Fraud

Life insurance is one of the first things people purchase when they start a new job or strike out on their own. Purchasing a life insurance policy is one of the easiest, most secure ways to plan for your future, and offer you an option to continue to provide financial support for your loved ones, even after your death. But because the life insurance policy business relies on a variety of features, namely equities, investments, and the changing financial market, often, consumers run the risk of purchasing a fraudulent policy and never discovering their mistake until it is too late. If you or a loved one has been the victim of insurance fraud, it is important to contact an experienced California life insurance lawyer as soon as possible. 

If you are the victim of life insurance fraud, it may be possible for you to recover the money that you lost. Your ability to recover compensation for your financial losses will depend upon the circumstances, including whether the insurer was licensed to sell life insurance in the State of California or whether you can prove that the fraud actually occurred.

Evans Law Firm can provide you with help determining if you can get back your lost funds and can assist you with the process of recovering the money that the fraud cost you. Our California life insurance lawyers have taken legal action against many of the major life insurance providers and we have successfully represented many fraud victims in individual claims and class action lawsuits.  You should give us a call if you want a compassionate and knowledgeable advocate on your side.

The Importance of Life Insurance for Your Loved Ones

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.

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 even have the slightest of concerns that your insurance agent or company may be acting inappropriately, you should contact a California life insurance lawyer to evaluate your potential claim. 

What is Indexed Universal Life Insurance?

Indexed universal life insurance is similar to universal life insurance, but with a few key differences. Our California life insurance lawyers note that these differences are key to understanding how an indexed policy could be used against you. Universal life insurance takes a variety of forms, from a basic, no-frills, fixed-rate insurance policy to the variable models which give policyholders more options for investing in a number of equity accounts. In contrast, indexed universal life insurance offers policy holders two options—allocate cash value amounts in either an equity index account or a fixed account. If you opt for an equity index account, there are several popular indexes to choose between (Nasdaq 100, S&P 500, etc.).

An indexed policy allows the owner to decide how much to contribute to fixed and indexed portions, and typically, the provider guarantees the principal amount in the indexed portion, and places a cap on the maximum return that can be earned on that account. Because the policies are considered “hybrids” of the universal life insurance policy world, they are not as costly as others on the market, usually due to the lack of management needed to maintain them. However, the smooth sales pitch of a cheap, profitable universal life insurance policy only goes so far and is ripe for fraudulent activity.

Major sellers of these policies throughout California and nationwide include:

  • Minnesota Life
  • Penn Mutual
  • Midland National Life
  • National Life
  • AXA Equitable Life
  • Lincoln Financial
  • Pacific Life
  • Transamerica Life
  • John Hancock Life

Our California Insurance Lawyer Explains the Risks of Indexed Universal Life Insurance

There may be downsides to IULs as well—especially for more buyers of more modest means. Before purchasing a product from any of the companies listed above you should be fully aware of the risks as well as the benefits.  If you have purchased an indexed universal life policy in California and would like a free legal evaluation of it, please contact a California life insurance lawyer at The Evans Law Firm, Inc today.

Given how the cash value of IULs grows through interest credits derived from a financial index, it may be an inappropriate vehicle for those who have a shorter timeline or insufficient discretionary income. And while IULs may offer tax benefits, the advantages of IULs may be difficult to comprehend or fully explain, and careful structuring may be necessary in order to realize them.

Similarly, IULs may not line up with a buyer’s goals or benefit preferences, and policy illustrations may not accurately reflect the realities.  Sometimes the policy illustrations are missing or deceptive to the buyer.  With respect to associated fees and costs, IUL policies often have long surrender periods, in which policy owners can incur surrender charges for ten or fifteen years, or even longer.  In addition, because IUL policies are life insurance products, mortality charges may reduce their value.

Another Life Insurance Scam: Churning

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.

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. Thus, the sooner a client notices a potential scam and contacts a California life insurance attorney, the better. 

When Can You Get Your Money Back After a Life Insurance Scam or Fraud in California

If the life insurance company you purchased your policy from was licensed but the company went bankrupt, the California Life & Health Guarantee Association helps protect you from financial loss due to the insurer’s insolvency. Policyholders whose life insurers go bankrupt get limited coverage through the Guarantee Association, but this is still an important form of protection to make sure a policyholder does not lose everything invested in a policy because the company who sold it was undercapitalized.

If the fraud occurred in connection with the marketing of the insurance policy or in connection with the terms of the insurance policy, recovering money can also be possible. Under these circumstances, to recover lost funds, fraud victims would need to pursue legal action against the insurance provider who issued the policy and/or against the insurance agent who sold the investment to the policyholder under fraudulent terms.

Legal action could be pursued against an insurer and/or against an insurance agent through an individual claim in state or possibly federal court with the help of California life insurance lawyer. If an insurer or agent defrauded many victims, claims could be pursued through class action litigation or multi district litigation.  Many claims can also begin in court but can settle outside of court when the defendant accepts responsibility for the fraud and a negotiated settlement agreement can be reached.

In order to be successful in pursuing a legal action and recovering compensation for fraud, victims who were defrauded by an insurer will need to prove that they relied on false statements about material facts. Victims can prove they were defrauded about the terms of an insurance policy they purchased or can demonstrate that they were provided with incorrect information about whether an investment was an appropriate and viable one given factors such as their age, life stage, and risk tolerance.

Trust a California Life Insurance Lawyer at Evans Law Firm

Evans Law Firm has been investigating indexed universal life insurance for a long time, and we have turned up a great deal of information for consumers. If you have purchased an indexed universal life insurance policy, we recommend that you take a look at some of the posts we’ve written about them and the negative effects they can have on consumers’ finances and retirement options. Similarly, our life insurance lawyers are skilled at identifying scams like churning. 

If you purchased a Minnesota Life Insurance Company, Penn Mutual, Midland National Life Insurance Company, National Life, AXA Equitable Life Insurance Company, Lincoln Financial, Pacific Life, Transamerica Life, or a John Hancock Life Indexed Universal Life Insurance Policy product and would like a free and confidential legal evaluation, please contact a California life insurance attorney at Evans Law Firm, Inc. at (415) 441-8669 or contact us online now.

FAQs Answered by a California Insurance Lawyer

What Are Considered Examples of Life Insurance Fraud?

Life insurance policies can be complex for the uninitiated. They often consist of multi-page documents filled with legalistic jargon and terms of art that can easily confuse a potential policyholder, especially the elderly. The life insurance system is thus easily manipulatable by unscrupulous agents and those posing as agents to trick and deceive the unwary.

Some examples of life insurance fraud include:

  • Pocketing premiums: Occurs where an agent diverts the insured’s policy premiums to his or her own account, which can result in the policy lapsing due to nonpayment
  • Forgery: This can occur, for example, when someone who is not the policyholder changes the provisions of the policy (such as the beneficiary information) or forges the policyholder’s signature to take out an additional policy without the policyholder’s knowledge
  • Fake policies: Occurs where scammers pose as insurance agents to sell fictitious life insurance policies
  • Phishing: Occurs when a person posing as a representative from an insurance company contacts the victim claiming that there is an issue with their policy in an attempt to gain the victim’s money, credit card number, or Social Security number.
  • Policy switching: Occurs when an agent contacts the victim to offer them a policy with lower premiums without disclosing that the policy has lower coverage
  • Overselling: Occurs when an agent pressures the victim into purchasing unnecessary or inappropriate policies or add-ons that increase the cost of the victim’s premiums

If you suspect that you have been the victim of any one of these schemes, a California life insurance lawyer may be able to help you recover.

What Happens if Someone Lies to an Insurance Company?

Insurance companies and their agents are not the only ones who are capable of committing fraud. Life insurance premiums generally are determined by the applicant’s age, medical history, and lifestyle, making life insurance more expensive for the elderly and those with preexisting conditions than others. As such, many applicants for life insurance may be tempted to lie or otherwise misrepresent material facts in their applications to obtain lower premiums. But this is a mistake, as lying on an insurance application constitutes insurance fraud. Depending upon the amount of money involved in the fraud, criminal penalties can include restitution, jail time of up to five years, and a fine of up to $50,000 or double the amount of the fraud, whichever is higher.

How Do You Fight Against Life Insurance Fraud?

Prospective life insurance policyholders should keep the following tips in mind when shopping for policies:

  • Do not buy the first policy you see; shop around to compare prices and features
  • If you are a senior especially, take a family member or trusted friend along with you to any meetings with agents
  • Have a professional with nothing to gain from a sale look over any agent’s proposal
  • Only work with insurance companies with which you are familiar
  • Look up your agent’s license status at the California Department of Insurance
  • Provide the most accurate information you can
  • Do not sign blank documents or forms that contain missing information
  • Do not pay your premiums with cash, and make payments to the insurance company instead of the agent
  • Obtain a copy of your policy and review it to confirm that the costs and coverages are consistent with what the agent told you
  • Remember that if a policy sounds too good to be true, it probably is
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