Trying to save money on auto insurance? Don't get duped into a bogus policy

The economy is tight, and divers everywhere are on the hunt for auto insurance deals. Crooks are taking advantage of this by selling fake auto insurance policies. Victims pay their premiums -- and then, after an accident, their claims aren't paid.
Bogus policies are on the rise across all types of insurance, according to a bulletin from the National Association of Insurance Commissioners (NAIC). Unfortunately for consumers, fake auto insurance policies often look very much like the real thing, and they may not discover the scam until it's too late.
Many scam artists operate in several states under several names, according to NAIC. The marketing materials they use are slick and sophisticated, and often seem identical to marketing materials used by legitimate companies. In fact, according to NAIC, scammers might even fool reputable insurance agents into selling their policies.
Who might be at risk?
If you've recently been in an auto accident or gotten a drunken driving conviction, you may be frightened and frustrated by the spike in your auto insurance premiums. Given this extra financial pressure, you may be tempted to shop for a bargain. Thieves prey on that temptation.
According to a May 2011 bulletin from Michigan's Department of Licensing and Regulatory Affairs, a licensed insurance agent in the Detroit area was caught selling fake policies for too-good-to-be-true prices. And, in 2008, a fraudster in Grand Rapids, Mich., sold insurance paperwork he'd created on his home computer, according to Michigan news website The scam was revealed when a driver holding a fake policy got into a fatal car accident.
Red flags
According to NAIC and the Nebraska Department of Insurance Fraud Prevention Division, your auto insurance might be fake if:
  • The agent used aggressive sales tactics -- "If you don't buy today, the deal will be gone forever!"
  • The auto insurance is priced significantly below other comparable products on the market.
  • Coverage limits are surprisingly absent.
  • The agent asked for a payment in cash or by money order.
  • You never receive a policy or permanent ID card from the insurance company.
  • The policy and ID card that you do receive look suspicious, as if they've been copied or put together inappropriately.
  • Your ID card and policy info do not contain complete information.
NAIC recommends a three-step process if you suspect that someone may be trying to sell you a fake car insurance policy:
  • Stop before signing anything or writing a check.
  • Call your state's insurance department.
  • Confirm if the company is legitimate and licensed to do business in your state.

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