10 Ridiculous Ways Insurance Companies Rip Off Consumers

When you take out insurance, you might be under the impression that your monthly premium means that you needn’t worry about accidents, bad luck, or unforeseen circumstances. After all, that’s what your insurance is there to protect you from, right? Unfortunately, the truth is, insurance companies will do whatever they can to wriggle out of their responsibilities and rip you off with high rates, stonewalling tactics and anything else they can muster in order to take your money without giving you anything in return.

10. Car Insurance – “Low-Ball Offers”

When your vehicle is a total loss, your policy may cover a replacement or the cash value of an equivalent car. Car insurance companies make a habit of low-balling their cash offer, understating the car’s condition with imaginary quibbles about paint chips and dings. Worse than this, they will estimate the value of your car by using a “comparable” vehicle — with thousands more miles on the clock. The National Association of Dealers in America maintains that low mileage is a significant factor in a car’s value, but it seems the insurance companies would rather ignore this fact and simply rip you off.

9. Car Insurance – High Rates, Low Deductible

Insurance brokers and companies will often push you towards a policy with a low deductible, maintaining that you’ll find yourself less out of pocket should an accident occur. Of course, they don’t tell you the math, which makes it obvious that all but the worst drivers would be better off with a higher deductible. A $100 a month policy might mean that you’ll “only” have to pay $250 for one accident, but a $50 a month policy that means you’ll pay $1000 for an accident actually leaves you $450 better off, assuming you only have one accident a year, but of course the insurance companies don’t tell you this…

8. Car Insurance – Renewal Price Rises

Insurance companies rely on your sense of inertia. When the time comes for renewal each year they will often try to slip in a price rise and hope that you don’t notice — and they’re certainly not going to make it obvious. An introductory offer that’s too good to be true may well be followed by a price-hike and little to no explanation of what you’ve done to warrant an increase in your premiums. Take heed.

7. Travel Insurance You Don’t Need

Americans spend over $1bn a year on travel insurance, often sneakily included in the final bill for the holiday. While travel agents will give you the hard sell about the horrors of lost luggage and cancelled flights, what they won’t tell you is that you may already be covered by homeowners’ insurance on your credit cards, or legal obligations on the part of your airline. Your agent will also probably have a good deal going with a particular provider and will steer you towards the insurance deal that’s best for them, all the while pretending to be concerned about your welfare.

6. Title Insurance Kick-Backs

Title insurance is definitely a must-have for homebuyers, but it’s almost never a good idea to listen to the advice of your broker. They’re in it for themselves, not to get the best deal for you, and will no doubt direct you to a title company with whom they have a relationship. They certainly won’t tell you that the company used by the last owner will probably offer a better rate as they already know the property. Brokers use your need for title insurance to try to pressure you into moving fast, when you should really be shopping around.

5. Life Insurance Settlements

You might decide you want to sell off your life insurance policy for some ready cash. You might think that commission means that your broker will want to get you the best settlement payment, but their income isn’t based on the deal they get for you — instead it’s solely connected to the actual value of the policy. They have no incentive whatsoever to get you a good deal, and may be working behind the scenes to keep their buyers happy.

4. Home Insurance – Flood vs. Wind

After Katrina, the last thing Louisiana and Mississippi residents needed was rip-offs from insurers. But when homeowners with homeowners’ insurance policies tried to collect on damage caused by wind, the insurance companies did their best to try and characterize everything as water damage from flooding, as this normally isn’t covered by those policies. Lawsuits allege that insurance companies deliberately exaggerated flood damage so that US taxpayers would have to foot the bill. What’s more, it is alleged that insurance companies encouraged their employees to underestimate repair costs so that they wouldn’t have to pay out their full liabilities.

3. Health Insurance Billing

Medical bills are the leading cause of bankruptcy in the US, so those with good insurance breathe a sigh of relief when they feel confident that they have their needs covered. Of course, after the hospital visit the problems start. When insurance companies and health service providers disagree over the validity of claims, the consumer gets stuck in the middle, and insurance companies certainly don’t make them feel at ease. You may even end up paying a bill that you shouldn’t have to, just to get the threat of a bad credit score to go away.

2. Whole Life Insurance “Investment”

Whole life insurance is often pushed by brokers because it can be characterized as an investment. Of course, if you simply got a term life insurance policy for much cheaper and invested your extra cash you would likely end up with an investment worth twice as much. So why aren’t you made aware of the fact that this may not be the best option? Simple: insurance companies want to rip you off and so offer insanely high commissions to agents who can sell whole life insurance policies.

1. Health Insurance – “Reasonable and Customary Rates”


Visiting an out-of-network doctor means that your insurance company will generally pay a proportion, not of your bill, but a percentage of what they feel is a “reasonable and customary rate” for doctors in that area. Of course, consumers never seem to find that rate themselves. In fact, the New York State Attorney General Andrew Cuomo and the American Medical Association have filed suits against insurers alleging that the data on which they assess “reasonable and customary” is manipulated to save the insurers money and pass the cost on to consumers. The suits allege everything from eliminating high charges, to combining high and low-cost areas in databases to dilute the former, all of which means that “reasonable and customary” is in fact extortionate and highly unusual!

  • Your auto insurance example (#9) is flawed. If I pay $100/mo and $250 for an accident, I’ll have paid $1450 for the year. But if I pay $50/mo and $1000 for an accident, I’ll have paid $1600 for the year – paying an extra $150, instead of saving $450. I think the math forgot to take the monthly payments into account on the lower monthly cost option.

  • Paul

    Regarding #9, I think your math is faulty. If I pay $100/month + a $250 deductible, my total outlay in one year (assuming 1 accident) is $1450. However, if I pay $50/month + a $1000 deductible, my total outlay in one year (assuming 1 accident) is $1600. That makes the higher deductible more expensive by $150.

  • Robert

    I hate the insurance scam where I have 2 cars. I am the only driver. I have to insure both cars. I can only drive one at a time! Insurance should just insure the driver, not the car!

  • Marti

    Apparently the writer has/had one of those “street corner” insurance agents, not an insurance advisor. There’s a big difference.

  • Marti

    Robert, it is your choice whether or not to carry insurance on a vehicle if you’re not driving it. Keep in mind, if you DO drive it you need to put coverage back on it. Also, if you have a car sitting, you may want to keep comprehensive coverage on it in case someone decides to steal it, a tree falls on it, someone breaks the glass, etc. Hope this helps.

  • Xabre

    Insurance along with paying income tax are two of the biggest rip offs on the planet… With insurane you have a gun put to your head to buy insurance on your car, because its the law, so insurance companies have a captive audience, and income tax has nothing to do with paying for running the government its to pay back the banking cabals for bailing out all the western nations after the Great Depression, so the people are the colateral to the debt paid in perpetuity through income tax thats why we a birth certificate…and a social insurance number…

  • Thomas Moloian

    it’s painfully apparent now that all insurance companies are our just for profit and don’t give a rats ass about their customer well being. i’ve noticed this for past 20 yrs and it’s sickening. most of their customer service is now offshore and time will come when most of them will fizzle out. when you think about it it’s sad and there’s not much we consumers can do about it and worst of all depending on state you live in.

    i’m in worst state in america, CALIFORNIA! it sucks liberals and millions of illegals.we republicans are a vast minority and have virtually no say so. until our jackass liberal retarded jerry brown leaves this state will continue to be in shambles and illegals will get all the glory. i’m hoping and praying to god which liberal communists hate there will be a gop candidate in next years 2018 mid term elections will put this maggot asshole to pasture.

    neil kashkari, millionaire business man from laguna beach tried but failed due millions of illegals who are now allowed to vote thanks to faggot jerry brown got him over the top and god be my witness some republican will step in and beat this worthless faggot to finish line.