Insurance Sales Barred On Base but Personnel Are Vulnerable Off-Site

Military personnel are often young and transient, but they earn a regular paycheck from Uncle Sam. That makes them prime targets for shady sales practices and financial criminals.

New rules ban insurance agents from soliciting military personnel in barracks or at meetings at which attendance is not voluntary. In addition, agents aren't permitted to use superiors or officers to help sign up service members who are junior in rank or grade, and agents can't misrepresent insurance policies as investments.

The new laws are helping reduce inappropriate insurance sales on base. Now, however, "sales of inappropriate life-insurance products are occurring off base," says a report by the inspector general's office at the Department of Defense.

In Florida, regulators have also found that unscrupulous agents are changing their tactics, says Ray Wenger, financial administrator for the Florida Department of Financial Services. For example, his office is investigating charges that American Fidelity Life and Trans World Assurance sent a van to pick up military personnel and take them to meetings off base, promising prizes and free dinners. "Instead of going to high-ranking officers and asking them to coerce people to join, they're paying enlisted people $20 to $25 for every person they bring over," Wenger says.

Florida recently issued a show-cause order alleging that the two companies misrepresented an affiliation with the U.S. military and charging that one agent inaccurately claimed the military's own life insurance program couldn't be counted on to pay. The companies have filed a petition requesting an administrative hearing to dispute the allegations.

In Georgia, the state insurance department has revoked the licenses of several agents who violated its military sales regulations over the past year. It currently has several open cases involving companies accused of violating the new sales laws.

What you can do:

Max out your military insurance first. Servicemembers' Group Life Insurance, or SGLI, costs 6.5 cents per $1,000 of coverage per month, or $312 per year for the maximum $400,000, regardless of your age or health. You can also get up to $100,000 in coverage for your spouse.

Check out insurers and agents with your state insurance department if you need to buy additional coverage. Ask about licensing, complaints and disciplinary actions. Make sure the policy doesn't have a war exclusion. Report problems to insurance regulators and to the community-service office at the base.

Visit the National Association of Insurance Commissioners' military personnel Web page. The NAIC's InsureUonline.org also offers insurance advice for members of the military.