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.
