A representative of insurance company XYZ assesses your insurance needs and sells you insurance at a very competitive price. He tells you that, to activate your policy, you must pay the premiumA premium, or insurance premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200.
The premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000.  in cash or send him a cheque made out in his name. His commission will be taken out of the cheque and the difference will be transferred electronically to the insurer. You will therefore be insured that same day.

A few months later, when putting your papers in order, you realize you never received a confirmation of insurance. You try to call the representative only to learn that the number he gave you belongs to a pizzeria in a neighbouring town. You then call XYZ. You learn that the representative doesn’t work for the company! In fact, he doesn’t work for any insurer: he works for himself.

You gave money to a fraudster. He sells fake life, car and home insurance and pockets the premiums paid by clients. He even sells investments!

You don’t hear much about this type of fraud. Victims often lose only the amount of the premium — a much smaller sum than in some investment scams. But what would happen if you were to suffer a “covered” loss? The amount could be very high.