It amazes me how many people to this day believe insurance companies are some sort of magical service designed to protect innocent people from the pitfalls of life. The unfortunate reality is, at the end of the day insurance companies exist solely to make a profit. Don’t get me wrong, insurance companies aren’t evil conglomerates who are trying to take advantage of consumers in bulk. They provide a necessary service and for the most part do a great job of it. However, there are some sneaky tactics they use to charge more when they can. Here’s a look at three common ones.

Sneaky Tactic #1: Undercutting your payout

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In 2007 a report released by the North Dakota Insurance Department revealed Farmers Insurance was rewarding adjusters with gift cards and pizza parties if they met “low payment goals.” And it wasn’t just North Dakota insurance companies, further investigation revealed this was a common trend among many states. How can this happen? Well the truth is there’s always a fair amount of wiggle room in the adjustment. Many factors play into this and the adjusters know how to manipulate the variables to make sure they save as much money as possible. Does this always happen? Absolutely not, but it can.

To make sure you’re prepared do a little homework before your adjuster comes out. The first thing you will likely want to know is the extent of your injuries and any associated costs with them. Similarly, you need to know the true amount of damage done to your vehicle. On the surface it may just look like a crushed bumper, but there could be more underlying damage such as a twisted frame. If you can, get an estimate from a local repair shop you trust and compare this rate with the amount the adjuster quotes you.

Sneaky Tactic #2: Selling you more than you need.

One of the major ways insurance companies make easy profit is selling policies that people don’t truly need. An individual may walk into the office looking to get a policy that they were originally quoted $70 a month for and leave with a policy costing $120 a month. Where does the difference come from? Often times it’s simply a matter of over-insuring.

Insurance agents are trained from day one to try to sell you the most expensive plan you are willing to accept. After all, each month your policy goes by without a claim this additional expense for you is pure profit for them.

To prevent this from happening, it’s imperative that you do thorough research on the policy you plan to purchase and make sure you understand the coverage and features you would like in a policy. Simply calling up an insurance company and asking them to help you decide on a plan is a sure fire way to end up paying more than necessary.

Sneaky Tactic #3: Not requiring medical tests for life insurance

Some insurance companies offer “no medical test” life insurance. While it sounds like a simple way to avoid the hassle of getting life insurance, the truth is these policies are almost never a good idea.

The best case scenario with a policy like this is that you end up with a policy that costs you much more than it should. There’s simply no way to create a life insurance policy that is fairly priced for healthy and unhealthy people. If you go with a life insurance policy that does not require medical tests, you will automatically be charged a higher rate as you are lumped into this “unhealthy people” category even if your declaration says otherwise.

However, there is another common scenario that is far worse. In many cases, the company will simply refuse to payout the policy. Whenever someone dies with a policy like this there is always an investigation. In this investigation, they will often find medical issues that were not declared when the policy was started. Something as simple as high blood pressure can lead to your payout being denied.

Long story short, even if you are unhealthy it’s still best to go with a life insurance policy that requires a medical test so that you can be guaranteed a payout if you pass. Don’t take a risk with a plan that doesn’t require a medical test.

While these tactics may permanently scare many readers away from insurance companies, rest assured that the majority of the companies out there are fairly honest and for the most part take good care of their customers. However, every once in a while you will run into a company who employs these tactics so it’s critical to be prepared in case a company tries them on you.

Jessica Smith is a former life insurance agent and the current owner of The Life Insurance Gurus where users can compare life insurance rates.

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