Annuity Fraud Scammers Target Elderly Population

Across America more and more insurance scams are targeting the elderly community, particularly in the form of annuity fraud.

Consumers should be aware that they have legal recourse options when annuities and other forms of insurance fraud, including life insurance policies, fail to deliver the benefits promised by the policy.

What is an Annuity and How Does it Work?

An annuity is an insurance or investment product that is designed to provide a consistent stream of income, which is often used in retirement plans for many older Americans.

Annuities can work in two ways: either making an investment to the annuity and the annuity later pays the policyholder over the course of their life, or the annuity pays the policyholder back in a lump sum; these are called variable and fixed annuities, respectively.

In the case of a variable annuity, insurance companies invest the policyholder’s money into stocks, bonds, and other investments. These annuities offer tax-deferred payments that are determined by how successful the investments are, stocks or otherwise.

This form of annuity allows the policyholder to be paid for the rest of their life, or their spouses or designated person. While a fixed annuity garners interest overtime and is eventually paid out to the policyholder in one lump sum, it provides a guaranteed payout date which is key in preventing annuity fraud.

Annuity Fraud and Elder Financial Abuse

According to the North American Securities Administrators Association, over one-third of all financial elderly abuse cases in America involve annuity fraud.

Experts explain that the problem of annuity fraud comes from the combined problem of greed from the insurance companies and short life expectations of the policyholders.

Essentially, the insurance company allegedly operated under the assumption that the policyholder will not live long enough to collect their payments, or will not question the high fees or financial planning propositions presented to them.

Other signs of annuity fraud include:

• When the annuity makes up more than 35 percent of the senior’s assets
• The Surrender Fees is more than 14 percent of the principal
• If the same agent has sold the senior multiple annuities

Overview of Annuity Fraud Allegations

Due to the fact that variable annuities can be paid back over the course of the policyholder’s lifetime, these insurance products are among the most common tools used to scam the elderly out of their money.

Another way annuity fraud is conducted is when an agent offers the policyholder a different annuity plan, which is supposed better than their existing one. Oftentimes, the only difference between the plans is the amount of fees and raised monthly payments which agents often do to collect a new commission.

Experts warn that some of the most devastating cases of annuity or insurance fraud stem from independent agents supposedly misrepresenting the insurance company.

While most insurance agents are honest, they can also be the driving force behind annuity fraud scams, because they know how to manipulate the policies to their favor. Additionally, the agents have incentive to earn large commissions when they gain new policyholders because that is a majority of their income.

Other times, scammers could be acting alone while posing as an insurance salesman, by naming a fake insurance company. According to Literacy, scammers will conduct elaborate setups to present a fake insurance company in order to convince the elderly client to trust them. Once the money is handed to them, these scammers are often never seen again.

Experts advise the elderly to verify that their insurance agent is legitimate, and to consult with their lawyer if they do not understand something on their policy.

Get a Free Life Insurance Claims/Annuity Fraud Lawsuit Review

If you or your loved one purchased a bonus annuity, life insurance policy or Medicaid qualified annuity and it did not turn out as promised, you may need to have an investment fraud lawyer review the policy, the payments, and the potential benefits. You may be surprised at what they find, and you may even qualify for financial compensation beyond what the policy promised.

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