Unauthorized Insurance

DEFINITION of 'Unauthorized Insurance'

A phony plan that claims to provide financial protection against unforeseen and potentially catastrophic events. Unauthorized insurance is a scam that some unscrupulous individuals posing as insurance agents use to collect "premiums" from unwitting consumers. The "agents" take the money and run, and the consumers are not only out the "premium" money, but are left without insurance.

BREAKING DOWN 'Unauthorized Insurance'

Unauthorized insurance scams are especially problematic when the consumer does not find out that they have been cheated until they try to file a claim, because then they will find themselves unexpectedly on the hook for thousands of dollars when they thought they were insured. To protect themselves, consumers can check with their state's insurance department to find out if an insurance product they are being offered is legitimate. They should perform this due diligence before giving any money to the insurance company.