What is Unauthorized Insurance

Unauthorized insurance is a phony coverage 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 fake premiums from unwitting consumers.

These individuals take the money and run, leaving consumers lighter in their respective pockets, and without insurance coverage.

BREAKING DOWN Unauthorized Insurance

Unauthorized insurance is a potentially lucrative white-collar crime. These scams cause problems for unsuspecting consumers who do not find out they have been cheated until they try to file a claim. Individuals can find themselves out many months of lost premiums and on the hook for potentially thousands in uncovered damages.

To protect themselves, consumers can check with their state's insurance department to find out if an insurance product offered to them is legitimate. All shoppers should perform this due diligence before giving any money to an insurance company, while remaining wary of high-pressure sales tactics.

How To Avoid Unauthorized Insurance

In addition to checking in with a state insurance department, insurance buyers should comparison shop for policies. For example, shoppers should expect auto-insurance premiums for a brand-new Lexus to be higher than that of a used Toyota. If an unknown company is offering extremely low premiums for a Lexus, far below that of a Toyota, it could be a red flag.

It sounds simple enough, but it’s also important that shoppers know their agency or broker. Shoppers should deal directly with licensed agents and brokers. Each is required to show proof of their licenses. Online resources can help.

Keeping records makes sense, as well. Most states advise not to make payments in cash to insurance agents, and to pay only by check, money order or electronically via a credit or debit card. Also, shoppers should get a receipt.

Maintaining policy records also is a good idea. Printing or electronically storing a copy of an insurance policy is a smart move. It should carefully spell out what is covered and what isn’t. Any questions about the coverage should be easily explained by the agent or broker.

Health insurance can be particularly tricky. In addition to keeping an eye out for unauthorized health insurance, consumers might want to carefully review all health care bills to guard against being billed for services not received.

Lastly, a number of state agencies publish consumer guides for purchasing various types of insurance, as well as annuity products. These guides sometimes help with comparison shopping and also offer additional guidance for avoiding unauthorized insurance.