Clean Sheeting
Categories: Insurance, Ethics/Morals
Like what the cleaning staff at a motel puts on your bed in the morning...only it has to do with insurance.
What’s the first thing insurance companies ask when you are taking out a new life insurance policy? They present you with a very long list of medical conditions and ask if you have anything now or have had one or more conditions in the past. If you say "yes," they might not turn you down for the policy but it could be more expensive.
Clean sheeting is kind of like short sheeting a bed, except that it’s not just a prank but a fraudulent activity. The way it works is someone with a terminal illness takes out a life insurance policy without disclosing the disease. (This could run into problems later if they ask for your medical records.) Often the insurance agent selling the policy is aware of the condition, but is happy to get the commission. Then the policy is sold shortly thereafter at a discount, to avoid detection by the insurance company when the person dies. The money received from the sale is a lot less, but the clean sheeter figures it is better than nothing. The person who buys the fraudulently obtained policy is happy because he or she can buy the policy at a big discount, usually about 10% of the policy’s face value.
Most life insurance policies have an incontestability clause where it cannot be voided after two to three years due to someone misstating or lying about a pre-existing medical condition. So if the fraudster can live that long they might get away with it. Some states even allow insurance companies to avoid paying benefits if the policyholder had a serious medical condition when they applied for coverage and die within the contestability period. And if the insurance company can prove there was deliberate fraud, some states allow the insurance company to void the policy.
