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Published: Sep 26, 2023 15 min read

Life insurance keeps your loved ones financially secure after your death by providing coverage for funeral expenses, college, mortgage payments and more. It’s supposed to provide security — but life insurance scams do exactly the opposite.

Life insurance scammers prey on people to steal their money and personal information. While scams involving life insurance vary in nature, their effects are typically disastrous across the board. You can lose substantial amounts of money, or scammers could even steal your identity.

These consequences are why it’s prudent to learn about common life insurance scams and how best to avoid them. Here’s a guide, including a rundown of seven telltale signs that a sales pitch for life insurance may be fraudulent.

What is life insurance fraud?

Life insurance policy fraud is when scammers trick people into believing they're buying insurance coverage, or receiving proceeds, from a legitimate company when they're not. Instead, the vendors are out to steal your money or personal information or both. Once you pay them, they vanish into thin air, leaving you with a fake life insurance policy and less money in your pocket.

Life insurance fraud is more common than you might think. In 2020, it totaled $74.7 billion in the U.S., according to a Coalition Against Insurance Fraud estimate.

Common types of life insurance scams

Below are some common life insurance scams:

  • Phishing: This fraud begins with a scammer sending an email that appears to be from a real-life insurance company or broker. The email offers a payout, but only if you click a link and enter your personal information into a form. That information is then used to defraud you, and no insurance benefit is ever delivered. While it’s common with life insurance, the technique is also used in other scams, too.
  • Identity theft: These scams involve stealing your identity and using it for fraudulent purposes. Such schemes may begin with a phone call asking if someone close to you has recently died, and asking for your Social Security number to "expedite payment" from the deceased person’s life insurance policy. Alternatively, the caller may claim something is wrong with your own life insurance policy, and your personal information is required in order to fix it. They may also say your life insurance premium payments are overdue, and they require your credit card information to process payment.
  • Fraudulent beneficiary changes: This scam involves a scammer forging your signature on a policy so they, without your knowledge, can fraudulently make changes to it – such as making them the policy’s beneficiary.
  • Fraudulent beneficiary additions: Another variation on beneficiary fraud, this tactic is to try to trick the policyholder, usually an elderly family member who isn't in sound mind, into adding them as a beneficiary.

7 signs that you’re being targeted for a life insurance scam

While there are different types of life insurance fraud, they have common traits to look out for. We cover seven common life insurance fraud red flags below.

1. An exaggerated sense of urgency

Life insurance scams often use a high-pressure sense of urgency to push victims to act before they have time to think about what they are signing. Such demands exploit the urgency of the situation, hoping to catch you off guard at a low point, like when a family member just died and you’re thinking about your loved ones’ financial futures.

Techniques employed can include the use of aggressive language, like claiming the offer being made is time-limited, with its expiry being imminent. By pressing “stress and urgency” buttons, scammers hope to bypass rational thinking and make you fail to recognize the red flags they’re waving.

2. Insisting on immediate payment

Life insurance scammers frequently demand not only an instant decision on their offer but instant payment for it as well.

If you’re being pressed to immediately buy a policy, remember that such purchases are nearly impossible, especially over the phone. To get life insurance, you typically need to complete a life insurance application and sometimes a medical exam; it’s not something you can customarily do in a quick call.

3. Unsolicited offers and cold calls

Beware of unsolicited offers and cold calls when it comes to life insurance. For example, you might receive a call out of the blue promising an unbeatable life insurance deal. The caller may even have some of your personal data and weave that into their pitch, in order to create an illusion of trustworthiness or to get more of your personal information, like passwords or PINs for your financial accounts.

Similarly, scammers may send you texts pretending to be from a life insurance company. Often, a link in the text directs you to a website that asks you to enter your bank or credit card details, open a file or input a password. These scams are usually little more than an attempt to get your personal information and commit identity fraud.

4. Offers that sound too good to be true

If an offer sounds too good to be true, it probably is. Good deals on the best life insurance are certainly out there, but beware of pitches for alluring policies from individuals you do not know and did not contact for assistance.

How do experts define an offer that’s too good to be true? According to the National Association of Insurance Commissioners, if the premiums cited are more than 15% to 20% cheaper than the competition, it's probably a scam.

5. Typos and grammatical errors

Written material in texts or emails can provide telling signs of fraud. Legitimate insurers and other bona fide financial institutions are careful to present their products in a professional manner. Typos or grammatical errors are warning signs of a fraudulent message or website.

6. Absence of detail on policy exclusions and limitations

It's a warning sign if the representative or the documentation is not forthcoming about the details of coverage. Reputable insurance providers are always explicit about what is and isn’t covered, not least because they might be held liable for covering exclusions if they did not clearly disclose them earlier.

7. Fake life insurance companies and agents

Some scammers go as far as to create fake insurance companies, and then offer you a worthless policy written by these fictitious insurers. Even when the company is legit, the agent that reaches you may be a fraudster. Warning signs of this scam are agents who advertise cheap policies on social media, who won't get on the phone with you. Rather, they insist on only using email or messaging apps and don't issue any direct communications or documents associated with the actual insurance company.

How to avoid life insurance scams

Here are some tips and techniques to minimize the likelihood of being ensnared in a life insurance scam.

Look into the reputation and ratings of the life insurance agent or company

To check an agent or company’s reputation and ratings:

  • Research the company thoroughly: If you’re being offered coverage from a company with an unfamiliar name, do at least some online research. Other people may already have had scammy experiences with the faux insurer. Search online for the words "scam," "complaint," and "fraud" with the company's name. Research independently, ensuring the company has a physical address and reachable customer service. Then contact the company by using that independently obtained information and inquire about the assertions and offers you encountered.
  • Ask your financial advisor: If you have a financial advisor, they may be able to give you information on whether a company or agent is legitimate.
  • Research policies: Don’t accept a policy quote or believe generous coverage claims until you’ve looked into competing policies. Get quotes on your own or work with a licensed broker who will do the work for you.
  • Know how people pay for policies: Don’t pay an insurance agent for a policy, as some scammers request you do. Rather, be aware that you secure life insurance policies by paying the insurance company directly..

Confirm credentials and check for regulatory compliance

To confirm an agent's credentials, ask for their license number and check with your state's insurance department. Check with agencies where you live to ensure your state has licensed the settlement company or broker you’re talking to. You can also get such information at FINRA BrokerCheck.

Be prudent with personal information

Treating your personal information with the utmost care will go a long way toward warding off identity theft, which in turn will reduce your odds of being scammed. Here’s how to treat your particulars with care:

  • Never share sensitive information by phone. This includes such data as your Social Security number or bank information on an unsolicited call.
  • Be careful about posting personal information on social media. Err on the side of the caution about what you share online or through apps about your identity or finances. Scammers can use this information to learn more about you and to tailor their scam to you and your vulnerabilities.
  • Resist responding to unsolicited communications. If you don’t recognize a phone number, email address or other identifying information, make it your default to ignore it.

Understand life insurance policy terms, conditions and exclusions

Understanding key terms, conditions and exclusions is critical when reviewing a life insurance policy. Read up on life insurance for beginners because you're less vulnerable to scams if you’re educated. Carefully go through the policy itself and look for any fine print that might restrict coverage. Consider seeking advice from someone you trust, like a knowledgeable friend or family member.

Below are some life insurance basics any legitimate life insurance agent can give you information about:

  • Policy premiums: Ask how much your monthly premium will be and whether it's a fixed premium or an adjustable premium that rises as you age.
  • Coverage amount and type: Clearly grasp the coverage the policy provides. An agent should be able to tell you whether it's term life insurance, which lasts for a specific period, or whole life insurance, which covers you for your entire life.
  • Exclusions and limitations: Get exclusions in writing, and if the agent won't provide them, be wary. Exclusions are scenarios the policy won't pay out for, like death resulting from certain activities (skydiving, for instance), especially during the first few policy years. Limitations might include a waiting period before the full death benefit is available.
  • Riders: Ask about riders and whether you can add them to your policy. Insurance riders are optional features you can add to your policy; examples are accidental death benefit riders or critical illness riders. These can enhance your coverage but may also increase your premium.
  • Policy renewal and conversion: Get renewal details in writing. For term policies, understand how renewal works when the initial term ends. Some policies may require a medical exam, and premiums could increase at renewal time. Additionally, inquire about the conversion option, which allows you to convert a term policy to a permanent policy without a medical exam.

Don't sign incomplete or vague documents

Get coverage details, premium amounts, exclusions, rider details, and policy renewal information in writing. Policy documents without this information are incomplete at best and a scam at worst.

If something seems unclear to you, trust your gut and don’t sign it; instead, ask questions and press for more details. Walking away is always an option, and is well worth it to protect yourself from a possible scam.

Get multiple quotes before making a decision

Before committing to a life insurance policy, get quotes from multiple reputable insurers. Doing so allows you to compare coverage options, premiums and benefits. That way, you’ll make an informed decision that aligns with your financial goals and your family's needs.

How to report life insurance fraud

To report life insurance fraud, see if your state has an insurance bureau that investigates insurance fraud. You can also contact your state's insurance commissioner or insurance department. Another option is calling the National Insurance Crime Bureau, a nonprofit that performs life insurance fraud investigations, at (800) 835-6422.

Why do I keep getting life insurance calls?

There are a few reasons you might be getting life insurance calls: A company may have gotten your information off the internet or from a data breach, or you may have accidentally answered a scam call in the past, which alerted the scammer that your number was active.

Summary of the 7 signs of life insurance scams and how to avoid them

Life insurance scams are all too common, but some due diligence can help you avoid them. Be wary of high-pressure sales tactics for offers that sound too good to be true, or an agent who aggressively insists on immediate payment.

It’s always worth taking your time to research a company, verify an agent is legitimate and thoroughly read and understand an offer before you sign it. This will go a long way toward keeping you safe.

Finally, take your time. Resist the feeling that you need to buy a policy rapidly, especially if it’s one that was extended primarily by phone, email or app. If the rep resists your diligence about buying coverage, that alone can be a red flag that suggests you might not be dealing with a legitimate seller.

The best life insurance companies understand that this coverage is important, and complex, and are willing to allow you time to consider it, and even to research other providers, before pressuring you into a decision.