Let’s face it -- insurance is already one of those necessary evils, like flossing or assembling IKEA furniture. You pay for it, you hope you never have to use it, and when you do, you cross your fingers and hope the process isn’t as painful as stepping on a LEGO. But just when you think you’ve got it all figured out, scammers show up with their trickery, ready to part you from your hard-earned cash faster than you can say “deductible.”
Here’s the good news: Knowing what to watch for can help you avoid falling victim to the most common insurance scams. Let’s break them down, one shady scheme at a time.
1. THE FAKE INSURANCE PROVIDER SCAM
You’re scrolling online, minding your business, when you see an insurance deal that seems too good to be true. Low premiums, full coverage and “instant approval.” Sounds great, right? Until you file a claim and realize the company doesn’t actually exist.
How to Spot It: If the company is unheard of, do some digging. Legitimate insurers are licensed and regulated by state insurance departments.
Check reviews and complaints on the National Association of Insurance Commissioners website: www.naic.org.
If they demand full payment upfront in gift cards or cryptocurrency, run.
2. THE STAGED ACCIDENT SCAM
You’re driving along, obeying all the laws like the responsible adult you are, when suddenly -- BAM! Someone slams into your car. Except, surprise! It wasn’t an accident at all. Scammers stage accidents to make false insurance claims, often faking injuries and vehicle damage for maximum payout.
How to Spot It: Be wary of drivers who wave you into merging and then magically “don’t see you.”
If witnesses appear suspiciously fast or seem too rehearsed, take note.
Always call the police for an accident report. Scammers will try to avoid official documentation.
3. THE FAKE HEALTH INSURANCE SCAM
In this nightmare scenario, scammers promise a comprehensive health insurance plan at an unbeatable rate. Only when you actually need medical care do you discover the “coverage” you bought is as empty as a gas tank on payday.
How to Spot It: Beware of pushy salespeople who promise “limited-time offers.”
Verify that the plan is registered with Healthcare.gov or your state’s insurance marketplace.
If a plan isn’t Affordable Care Act-compliant but claims to cover preexisting conditions, that’s a major red flag.
4. THE PREMIUM DIVERSION SCAM
An agent takes your insurance payment but never sends it to the company. Instead, they pocket the money and leave you uninsured -- until you try to file a claim and find out your policy was never active.
How to Spot It: Make payments directly to your insurance company, not to an individual agent.
Confirm your payment was received by checking with your insurer.
If your agent is suddenly hard to reach after taking your money, get suspicious fast.
5. THE LIFE INSURANCE IMPERSONATION SCAM
A scammer poses as an insurance agent and tells you a long-lost relative (whom you barely remember) left you a hefty life insurance payout. But first, you just need to pay a small “processing fee” to claim it. Spoiler alert: There’s no inheritance -- just a scammer laughing all the way to the bank.
How to Spot It: Real insurance companies don’t ask for processing fees upfront.
If the “agent” demands personal banking details, it’s a scam.
Check with the actual insurance company before believing any inheritance claims.
6. THE MEDICARE AND SOCIAL SECURITY SCAM
Scammers pose as Medicare or Social Security representatives, claiming you need to verify or update your information to keep your benefits. In reality, they’re just after your Social Security number to commit identity theft.
How to Spot It: The government will never call you out of the blue asking for personal information.
If someone pressures you to act immediately, hang up.
If in doubt, call Medicare (1-800-MEDICARE) or Social Security (1-800-772-1213) directly.
7. FAKE “CLAIMS ASSISTANCE” SCAMS
After a natural disaster, scammers show up offering to help you file an insurance claim. They promise to handle the paperwork, negotiate with your insurer and maximize your payout -- for a fee, of course. Once paid, they vanish faster than your motivation to exercise after New Year’s.
How to Spot It: Your insurer provides claims assistance for free.
Never give personal information to unsolicited “insurance advisers.”
If they demand payment before doing anything, it’s a scam.
Final Thought: Trust but verify.
Insurance scams are an unfortunate reality, but with a little vigilance, you can stay ahead of the scammers. If something feels off, trust your instincts and double-check everything. When in doubt, contact your state’s Department of Insurance or the National Insurance Crime Bureau (www.nicb.org) to verify legitimacy.
Because the only thing worse than dealing with an insurance company is realizing you weren’t actually dealing with a real one at all.
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Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at “Ask Mary.” This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book “Debt-Proof Living.”
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