Making Sure Your Parents Don’t Get Screwed Buying Insurance They Don’t Need

Today, I read a rather shocking story that happened in California. Basically, an insurance agent ended up selling an annuity to an 83 year-old man and it ended up being prosecuted. Why? Because the product was clearly not in the clients best interest. You can read the whole story here:

http://www.insurance.ca.gov/0400-news/0100-press-releases/2010/release145-10.cfm

This Happens A Lot More Than We Think

I know of many kids that help their parents or other elderly members of their family with finances, things like investments, banking, etc. For some reason, we rarely think about monitoring insurance policies even though those can end up having just as big of an impact. This specific case seemed fairly obvious and did end up being prosecuted. I would suspect that this happens quite frequently though and we rarely hear about it.

I’m also quite certain that there are very few places where this would actually be prosecuted.

It’s Often “Legal Fraud”

Obviously, annuities can be great products in certain circumstances but it’s not always the case (same thing for any other insurance policy) but the difference is that while the impact can be as dramatic as fraud, you rarely can do something about it until it’s too late.

Be Present In Their Lives

The objective is not only to look after them, their care, etc but also to make sure they know they can trust you, that big purchases should probably be discussed before acting on them. In almost all cases, they’ll end up making the end decision but if you at least get a chance to take a look at the product and give your opinion, chances are that you’ll be able to fight back some too frequently used “scare tactics”. I can easily imagine that playing on a senior’s fear of “running out of money” could become a powerful sales tactic, unfortunately.

What are your thoughts on this story?

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