Looking to take out loan insurance? Learn how to find a legitimate provider and protect yourself against scams.
If you want to take out loan insurance but aren’t sure how to protect yourself against online scams, you’ve come to the right place. We’ll show you the measures you can take to make sure your money and personal information don’t fall into the wrong hands.
Find out how to recognize a loan insurance scam and what you can do to identify a legitimate lender.
How do loan insurance scams work?
Loan insurance scams are typically carried out online and can be very difficult to detect.
There are two main types of loan insurance scams to watch out for.
The first is a phishing scheme in which the provider collects your personal or banking information through your loan insurance application, and then uses this info for personal gain without ever issuing your loan insurance.
The second is a fraudulent payment scheme, where the provider charges you up-front fees and then takes off with your money.
How to keep yourself protected from loan insurance scammers
While it can be difficult to spot a fake online, there are some red flags you should watch out for to protect yourself.
- Unsolicited offers. If you’re contacted out of the blue with an offer for loan insurance, chances are it’s fraudulent (especially if it’s not from your lender).
- Offers that are “too good to be true”. If a provider offers rates for insurance that are suspiciously low, chances are they’re running a scam.
- Requests for up-front payments. It’s illegal for a lender to ask you to pay any kind of deposit for insurance before you receive the full amount of your loan.
- Suspicious emails. Keep an eye out for emails from generic email addresses or those that look like they’re coming from a legitimate company but are spelled incorrectly.
- Unsecured websites. Don’t put your information into a website that doesn’t start with https:// (with the “s” at the end indicating that the site is secure).
What can happen if you do get scammed?
If you end up getting scammed, you’re not alone. Thousands of Canadians are deceived by phishing and advance payment schemes every year, with consequences ranging from identity theft to loss of funds.
If you’ve been scammed, you should report the situation to your bank, the authorities and the Canadian Anti-Fraud Centre. If you’re a victim of identity fraud, you should also freeze your accounts and report to the credit bureau.
If the person responsible can be located and charged with a crime, you could get your money back through criminal restitution. It may also be possible to recover some of your losses through your bank or credit card company.
What should I do if I’ve been scammed?
- Gather proof. Gather as much information as you can about what happened. This includes documents, receipts, copies of emails and/or text messages.
- Alert the police. You should let your local law enforcement know that there are scams targeting the area, so that they can take preventative measures.
- Contact the Canadian Anti-Fraud Centre (CAFC). You can report the loan insurance scam through CAFC’s toll-free number or its online Fraud Reporting System (FRS).
- Freeze or flag your accounts. Victims of identity fraud should place flags on all their accounts and report to both credit bureaus, Equifax and TransUnion.
Where can I get legitimate loan insurance in Canada?
- Your lender. If your lender has issued you with a full loan, chances are the insurance they offer is above-board (unless they’re attempting to pressure you into buying it).
- Bank or credit union. Banks and credit unions are federally regulated, which makes them a trustworthy source of financial products, including loan insurance.
- Certified online provider. Before you take out loan insurance with a provider, you should double-check that they’re registered with the Better Business Bureau.
- Reputable insurance agency. Many online providers have a significant online presence as well as a wealth of positive online reviews. Be sure to do some research before you hand over your personal information.
Which factors should I consider when comparing my options?
- Reputation. Find out if the insurance provider is legitimate by doing some online research, including looking at reviews and contacting the Better Business Bureau.
- Annual fees. Look at the premiums you’ll be charged and settle on the policy that offers the biggest payout for the lowest cost.
- Maximum benefit. Find out what the maximum benefit is and make sure it’s enough to cover your outstanding loan (or at least a large portion of it).
- Eligibility. Make sure you’re in good health and fall within the age limits required for insurance coverage so that you don’t end up paying for insurance you can’t use.
- Exclusions. Search for a lender that doesn’t void coverage in certain situations, such as if you get injured while doing a high-risk activity or contract a hereditary illness.
- Reductions. Some contracts will determine your payout based on your age. Look for a provider that offers the same amount of coverage even as you get older.
Taking out loan insurance doesn’t have to be a risky endeavour, so long as you know how to protect yourself online. Find out more about how online scams work, including red flags to watch for and factors to consider when comparing your options.