How to avoid life insurance scam

How to spot red flags when shopping around for a policy.

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Purchasing life insurance can get complicated in a hurry, and unsuspecting customers can find themselves lured into life insurance scams. Learn how to recognize legitimate policies and steer clear of common hustles.

Top life insurance scams

Avoid being sold something you don’t need by being aware of these common life insurance scams:

Buying more than you need

It’s tough to estimate how much coverage you’ll need — which is why some insurance agents may try to take advantage of you.

The larger the policy you purchase, the more money a commissioned agent stands to make. Be wary of pushy sales tactics that encourage you to purchase beyond your means.

Stranger-owned life insurance (STOLI)

Stranger-owned life insurance is a policy taken out by an individual to be sold to a third party with no insurable interest in the policyholder. Insurance interest is an essential component of insurance policies. Without it, the policy is considered both unethical and illegal.

Taking out a policy on your children

Purchasing a policy for your child might seem like a smart move, whether it be to protect the family in the event of the child’s death, or as a tax-deferred savings product.

But consider the following: It’s statistically unlikely that your child will die so early on in life. And if you’re looking for a long-term savings product, there are plenty on the market that won’t gouge you with hefty fees.

Convinced to buy an annuity you don’t need

When purchasing life insurance, you may be encouraged to buy an annuity — an investment product often sold in tandem with life insurance.

But while annuities are designed to offer a steady income stream in return for a lump sum payment, they’re accompanied by low interest rates, taxes and a heap of complicated fees.

Phishing emails asking for personal information

Typically, a phishing attack consists of a fraudulent request for personal information, often under the guise of a trusted provider. Phishing attacks can come in a variety of forms across a multitude of social media platforms.

You may be told you’re the unexpected beneficiary of a policy, or that something’s wrong with your life insurance. Scout for poor spelling, strange URLs and steer clear of any links you don’t recognize.

When in doubt, reach out to your provider by phone to clarify any requests for personal information.

Fake life insurance agents

A particularly malicious form of life insurance fraud comes in the form of fake life insurance agents. These individuals aren’t licensed insurance agents. They’re simply looking to pocket the cash of anyone they can sell a so-called “policy” to.

If you receive an unsolicited call from an unfamiliar agent or provider, think twice before you dish out any personal information. If you’re unsure, assess your insurance options in person with a provider you know and trust.

How to avoid a life insurance scam

Steer clear of any fraudulent life insurance pitfalls by:

  • Research the company. Do your homework and look into the provider you’re interested in. Explore feedback from its customers through the Better Business Bureau and Trustpilot.
  • Request your agent’s credentials. Most provinces require insurance agents to hold a license alongside mandatory participation in continuing education programs.
  • Ask about commission. How much does your insurance agent stand to earn off the policy you purchase? Don’t be afraid to ask your agent if they work on commission.
  • Learn about the policies. The more informed you are on the different types of life insurance policies, the better equipped you’ll be to spot potential fraud or upselling tactics.
  • Read before you sign. Don’t let the jargon intimidate you — take your time and review your policy carefully before you sign it.

Compare other life insurance companies

Bottom line

Avoid life insurance fraud by learning to recognize the red flags. Compare your life insurance options with other providers to find the policy best suited to you and your loved ones.

Frequently asked questions

How do I report life insurance fraud?

If you suspect any fraudulent activity, contact the Canadian Anti-Fraud Centre by phone or through its online reporting system to report the incident.

How do I know if a life insurance company is legitimate?

The Better Business Bureau (BBB), Trustpilot are all reputable reporting agencies that you can rely on to research the provider you’re interested in. You can also contact your provincial department of consumer affairs to find out if the license for a particular provider or agent is in good standing.

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  • Four Signs That It’s a Scam
  • What You Can Do to Avoid a Scam
  • Report Scams to the FTC

Four Signs That It’s a Scam

1. Scammers PRETEND to be from an organization you know.

Scammers often pretend to be contacting you on behalf of the government. They might use a real name, like the Social Security Administration, the IRS, or Medicare, or make up a name that sounds official. Some pretend to be from a business you know, like a utility company, a tech company, or even a charity asking for donations.

They use technology to change the phone number that appears on your caller ID. So the name and number you see might not be real.

2. Scammers say there’s a PROBLEM or a PRIZE.

They might say you’re in trouble with the government. Or you owe money. Or someone in your family had an emergency. Or that there’s a virus on your computer.

Some scammers say there’s a problem with one of your accounts and that you need to verify some information.

Others will lie and say you won money in a lottery or sweepstakes but have to pay a fee to get it.

3. Scammers PRESSURE you to act immediately.

Scammers want you to act before you have time to think. If you’re on the phone, they might tell you not to hang up so you can’t check out their story.

They might threaten to arrest you, sue you, take away your driver’s or business license, or deport you. They might say your computer is about to be corrupted.

4. Scammers tell you to PAY in a specific way.

They often insist that you pay by sending money through a money transfer company or by putting money on a gift card and then giving them the number on the back.

Some will send you a check (that will later turn out to be fake), tell you to deposit it, and then send them money.

What You Can Do to Avoid a Scam

Block unwanted calls and text messages. Take steps to block unwanted calls and to filter unwanted text messages.

Don’t give your personal or financial information in response to a request that you didn’t expect. Legitimate organizations won’t call, email, or text to ask for your personal information, like your Social Security, bank account, or credit card numbers.

If you get an email or text message from a company you do business with and you think it’s real, it’s still best not to click on any links. Instead, contact them using a website you know is trustworthy. Or look up their phone number. Don’t call a number they gave you or the number from your caller ID.

Resist the pressure to act immediately. Legitimate businesses will give you time to make a decision. Anyone who pressures you to pay or give them your personal information is a scammer.

Know how scammers tell you to pay. Never pay someone who insists you pay with a gift card or by using a money transfer service. And never deposit a check and send money back to someone.

Stop and talk to someone you trust. Before you do anything else, tell someone — a friend, a family member, a neighbor — what happened. Talking about it could help you realize it’s a scam.

Report Scams to the FTC

If you were scammed or think you saw a scam, report it to the Federal Trade Commission.

Life insurance can give you the peace of mind that your spouse or children will be taken care of in the event of your death. Unfortunately, there are fraudsters out there who know how to prey on your fear for your dependents and scam you out of thousands of dollars.

When you’re shopping for a life insurance policy, it’s important to recognize scams and life insurance sales pitches that benefit only the agent, not the policyholder.

Look out for tie-ins. Be wary of this scam when you are shopping for auto or home insurance. Many automobile insurance carriers offer multi-line discounts for policyholders who have more than two lines of insurance with them. To increase production numbers, some insurance agents will give you two quotes: one for the policy you requested, another for the policy you requested tied together with a life insurance plan you didn’t request. The second quote is usually cheaper.

Make sure that the agent is only quoting you what you request. When an agent generates a life insurance quote, a disclaimer pops up telling him or her that you must be notified that the quote will gather personal information about you. If you consented to your personal information being accessed only for an auto insurance quote, not a life insurance quote, contact your state insurance department and file a complaint.

Don’t make payments directly to the agent. Never sign a check or send money directly to your agent. If your insurance agent asks you to start paying your life insurance premiums directly, he or she is likely to pocket the money and leave you without insurance coverage. Seek coverage elsewhere.

Understand churning. Churning occurs when an insurance agent promises you a policy that is supposedly better but costs more and doesn’t actually offer any added benefits. The result of this life insurance scam is simple: You end up paying more for the same type for coverage, and the insurance agent collects a higher commission. If your agent calls you to upgrade your insurance policy, make sure that you are getting a complete proposal before signing any forms.

Investigate the agent. Always do your research about life insurance companies. Verify licensing through the state insurance department and read reviews online. In addition, use caution if you find that other insurance institutions have terminated an agent.

Review all documents. Never sign blank documents or documents filled out by the agent. Ask to see copies of everything you are asked to sign and the premiums and benefits you are to expect with your policy. Many insurance companies are utilizing electronic applications, requiring applicants to sign their name on a pen pad while the agent scrolls through the app on the computer. Make sure the agent is showing you every screen and not just paraphrasing, expecting you to sign blindly.

Walk away. If you are being pressured in the office or over the phone, just tell the agent no and walk away. If you don’t want your existing agent to contact you about up-sales, ask him or her to add your number to the “do not solicit” list and add that you don’t want unsolicited e-mails, phone calls, or letters.

Jeff Rose is a Certified Financial Planner and Iraqi combat veteran. He blogs at Good Financial Cents , Soldier of Finance and Life Insurance By Jeff .

Life insurance is becoming more and more popular these days and so there are numbers of life insurance companies that are offering life insurance to numbers of individuals. But there are as well numbers of some other so called life insurance companies that are just waiting for someone that is gullible enough to fall into their hands. That is the reason why there is a need for you to always be prepared for those fraudulent companies as well as scams as they will only get your money. Aside from maintaining as well as managing money there is also a need for you to consider protecting your money from financial predators.

There are as well numbers of ways on how you are to avoid life insurance scams. Some of the steps on how to do so could include the following:

  • Recognize the company’s name. There is always a need for you to read pamphlets as well as research their site entirely for the purpose of checking whether anything is strange.
  • Check whether the company includes detailed explanations into their forms of life insurance claims. You should therefore avoid signing blank life insurance claims forms.
  • There is a need for you to find out whether the company is being licensed. Once it is not being stated into their documents then Life insurance Commissioner could be a help.
  • You should also consider meeting the salespeople in person as well as know that they are definitely real. Always avoid doing business into a telephone salesperson.
  • Always keep personal information private and confidential. This would mainly concern the social security number in particular. If you are to make a purchase then that’s the time for you to give it out.
  • Be alert regarding bogus plans. This would refer to information being posted into the fliers as well as ads that you might receive into your email address or account.
  • Be suspicious regarding the life insurance particularly if it is offered too cheap. This might be a way of those scams to get you engage and then will just charge you an expensive fees later.
  • There is a need for you to be aware whether what the said company is to charge to you upfront and also in terms of paying out of the pocket. With regards to life insurance, you should not be charged unless you are to change your mind. If there is inconsistency there is a need for you to contact them immediately.
  • You should wait for the company to send the needed paperwork through mail. You should avoid giving your credit card number into a certain representative through phone call.
  • Before you sign anything in your life insurance along with too small and unreadable print read everything first. If you couldn’t read the document then never sign it as well.
  • You should always review carefully the explanation of the company with regards to the statement of benefits. If you are not provided with enough information then it must be life insurance scam.
  • It is important that you sign up for a plan that you could actually use. Never sign for extras into your life insurance policy which you are not to use at all. It might be the difference in between of high and low cost.

Ashley Hall is a writer and fact checker who has been published in multiple medical journals in the field of surgery.

Health insurance fraud and scams are growing in number. When we shop for health insurance, we are looking for good deals as smart consumers, but we can also fall into believing things that cannot possibly be true. In addition, with the advent of The Affordable Care Act and the pressure to fulfill the individual mandate, we may feel we need to make choices we aren’t prepared to make to be sure we aren’t fined for non-compliance.

How to avoid life insurance scam

As a result, it can be easy to fall for fraudulent health insurance schemes, where we think we are buying into something useful, only to learn later that we’ve been scammed by someone who never intended to help us pay for healthcare, and only intended to steal our hard-earned money.

Further, if we do fall for one of these scams, we not only lose money, but it can actually have a negative impact on whether or not we get the care we need when we need it, and whether or not we are eligible in the future to obtain real health insurance.

Health Insurance Scams and Frauds Are Growing

Fraud in healthcare can be found in almost every aspect of healthcare, from quacks to scams. In particular, since the passage of the Affordable Care Act in 2010, health insurance scams have been appearing with more frequency. The mainstream press has reported on a number of seemingly legitimate payers who have, instead, collected people’s money, and then did not cover what those people expected.

It is anticipated that over the next several years that even more will appear, calling themselves things like health benefits insurance, medical payment plans, medical discount cards, medical claims plans, and others. We need to protect ourselves and our families by being sure that any health insurance company we engage with is a bona fide, well-funded, capable company that can and will actually fulfill its promises, and provide us with all the benefits they claim they will provide.

8 Signs of Health Insurance Fakes, Scams, and Frauds

As you research your options for purchasing health insurance, be mindful of these signs that you should walk away:

  1. Avoid any company with aggressive salespeople. Don’t purchase insurance from any company that phones, faxes, or emails “good deals.”
  2. Avoid any promises of better pricing if you sign up right away. Real insurers don’t insist you rush through your decision-making (Although there can be deadlines for signing up by certain dates, like at the end of the year.)
  3. If a salesperson tells you that purchasing insurance is “required by law,” then hang up or delete the email.
  4. If the salesperson tells you they are licensed by ERISA, that’s a sure sign that they are bogus. All insurance companies are licensed in their states of business, but ERISA is a federal organization.
  5. If what the company offers you is called a “medical discount card” then there’s a good chance it won’t cover what you need. Be sure to check with your doctors, pharmacy and testing centers to see if they accept that card, and if they do, how much the discount really is. (The same is true for pharmacy discount cards.)
  6. If the cost is substantially less than any other pricing you have found, then walk away. If it sounds too good to be true, then it is.
  7. Avoid any company that has a process for acceptance that seems less demanding than another. People have been known to fall for scams just because they were told they didn’t need to have a physical exam, or because they weren’t required to provide a list of their current medications.
  8. Listen to your intuition. If you have any suspicion that someone or something isn’t what it says it is, then walk away.

4 Smart Final Steps Before You Purchase Health Insurance

If you have found a company you think you’d like to purchase health insurance from, take the following steps to be sure it’s bona fide:

  1. Research insurance scamming companies​ to be sure that the company is not on the list.
  2. Ask for a copy of the policy you would be purchasing, then read it to be sure it covers what you understand it should cover.
  3. Be sure the company is licensed in your state. You can find a state-by-state list of insurance commissioners here.
  4. If the company you’re talking to claims they provide insurance through another company that has a name you recognize, then check with that company to be sure the claim is true. (e.g., XYZ health Insurance claims it is a broker for Aetna—be sure you contact Aetna to confirm.)

Report the Fakes and Frauds

If you do run across a bogus insurance company that is trying to scam you, collect all the information you can from them about their potential insurance, business, and how they work with you. Then report them to your state’s insurance commissioner. Provide all the documentation you have collected.​

Then move on to make a better health insurance choice for yourself and your family.

Some unscrupulous agents take advantage of what buyers don’t know about life insurance to push unsuitable plans.

How to avoid life insurance scam

Choosing the right life insurance policy is a big decision. After all, you’re committing to a policy for 10, 20, or 30 years — or even the rest of your life, in the case of permanent life insurance policies.

That’s why many people rely on insurance agents or financial advisors to help them find the right policy. Unfortunately, some unscrupulous agents — and some con artists — take advantage of what customers don’t know about life insurance to push unsuitable (or illegal) plans.

What should you be on the lookout for? Here are three common life insurance scams.

Stranger-owned life insurance

When you allow someone who doesn’t have “insurable interest” in you — unlike your family, for example — to own a life insurance policy on you, this is known stranger-owned life insurance, or STOLI. In this situation, seniors typically take out a life insurance policy on themselves with the intent of transferring ownership to an investor or group of investors, in exchange for cash.

If you’re approached about an arrangement like this, keep in mind that it’s illegal in many states, and where it is legal, it’s frowned upon by insurers.

Inflating your net worth

In some instances, insurance agents fraudulently overstate your net worth on a life insurance application so that you qualify for a bigger policy than you need — and they score a bigger commission. Unfortunately, the policy may also be bigger than you can afford, leaving you no choice later but to drop it and lose your coverage.

In other cases, agents don’t even expect their customers to pay for the policy. In January 2014, the FBI brought one San Diego-based agent to court after he admitted to netting $3 million in commissions from selling $80 million in “free” life insurance policies to elderly buyers.

Want to make sure you’re not a victim? When you’re buying life insurance make sure you get a copy of your application and read it carefully for inaccuracies.

Annuities for the elderly

Life insurance companies often sell annuities, a financial product that invests buyers’ payments and then later provides a stream of income after a set period of time, often in retirement. If you have a chunk of money to invest, annuities can be a smart retirement income strategy, but only if you have some working years left — many annuities won’t pay out for 10 to 15 years and impose hefty fees for removing your money early.

Some financial advisors and agents manage to sell annuities to seniors, leaving them without a major source of retirement income for years, but providing the seller with the commission. If your agent is pushing a retirement financial product when you’re already in retirement, make sure you know when you’ll get paid before signing up.

Don’t be afraid to ask questions

Other life insurance scams are harder to detect. For example, an unscrupulous agent may try to sell you a policy that’s not in your best interest but that earns him or her a higher commission. Agents who recommend expensive, permanent life insurance — such as universal or whole life insurance — without a good reason, or who promote frequently switching policies, may be after your cash, and not the right policy for you. It’s worth asking some extra questions if you don’t understand why you need the coverage.

If you’re working with a new agent, you can also look that agent up on your state insurance department’s website . The department can tell you whether the agent is licensed and if there are any complaints filed against the agent. And if you are a victim of life insurance fraud, the department can open an investigation and help you get your money back.

How to avoid life insurance scamLife insurance is more than a purchase; it is an investment in protecting the financial future of your family in case the worst should happen to you. Most insurance companies and agents work tirelessly to provide you with the right policies that fit your budget.

Did You Check Out Our Life Insurance Quote Comparison Tool? Save BIG!

Unfortunately, there are still a few unscrupulous agents who may take advantage of you and provide plans that benefit their pocketbook more than your needs.

What follows are a few of the more common life insurance scams so you can watch out for them in case they should occur to you.

Overstating Net Worth

This is where the insurance agent exaggerates your net worth on your life insurance application. The result is getting a bigger policy that you may not be able to afford. This is done for the commissions that agents make on selling policies that are larger, even if you cannot make payments on the premiums. You will need to check out your net worth as stated in the policy before you sign.

Never Pay the Agent Directly

Your agent should never get paid directly by you as they are likely to put the money in their pocket and leave you without the proper coverage. Any offer by the agent to pay them directly should be refused and you’ll want to report them to your state insurance department for possible disciplinary action.

Annuities for Seniors

Annuities are part of many life insurance policies as they provide income after a pre-set period has passed so it can be enjoyed during your retirement. The pre-set time is often 10 to 15 years which makes them a sound investment if you are in your 40s or early 50s, but not worth it if you are already at retirement age.

When you consider the hefty fees imposed for removing the money early, it makes it a bad deal for seniors.

Tie-Ins

This scam involves the agent offering you a quote for the life insurance policy you requested and another, lower quote for the policy when it comes to another line of insurance, such as auto or home. Of course, you may not need the other policy and when combined it often adds up to more than what you are paying now.

So, while you may consider the offer, do not take it and instead focus only on the quote for the life insurance.

Life Insurance Owned by a Stranger

This is where a life insurance policy on you is owned by someone other than a spouse, parents or other family member. It often occurs when a senior takes out a life insurance policy on themselves, then transfers the ownership to investors for cash.

This practice is illegal in many states and not welcomed in the rest, so avoid this type of arrangement.

It’s important to know when to walk away, especially when you feel uncomfortable with some of the arrangements being made. Before you sign, read everything over and have a third party look at it if you have any questions.

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  • Four Signs That It’s a Scam
  • What You Can Do to Avoid a Scam
  • Report Scams to the FTC

Four Signs That It’s a Scam

1. Scammers PRETEND to be from an organization you know.

Scammers often pretend to be contacting you on behalf of the government. They might use a real name, like the Social Security Administration, the IRS, or Medicare, or make up a name that sounds official. Some pretend to be from a business you know, like a utility company, a tech company, or even a charity asking for donations.

They use technology to change the phone number that appears on your caller ID. So the name and number you see might not be real.

2. Scammers say there’s a PROBLEM or a PRIZE.

They might say you’re in trouble with the government. Or you owe money. Or someone in your family had an emergency. Or that there’s a virus on your computer.

Some scammers say there’s a problem with one of your accounts and that you need to verify some information.

Others will lie and say you won money in a lottery or sweepstakes but have to pay a fee to get it.

3. Scammers PRESSURE you to act immediately.

Scammers want you to act before you have time to think. If you’re on the phone, they might tell you not to hang up so you can’t check out their story.

They might threaten to arrest you, sue you, take away your driver’s or business license, or deport you. They might say your computer is about to be corrupted.

4. Scammers tell you to PAY in a specific way.

They often insist that you pay by sending money through a money transfer company or by putting money on a gift card and then giving them the number on the back.

Some will send you a check (that will later turn out to be fake), tell you to deposit it, and then send them money.

What You Can Do to Avoid a Scam

Block unwanted calls and text messages. Take steps to block unwanted calls and to filter unwanted text messages.

Don’t give your personal or financial information in response to a request that you didn’t expect. Legitimate organizations won’t call, email, or text to ask for your personal information, like your Social Security, bank account, or credit card numbers.

If you get an email or text message from a company you do business with and you think it’s real, it’s still best not to click on any links. Instead, contact them using a website you know is trustworthy. Or look up their phone number. Don’t call a number they gave you or the number from your caller ID.

Resist the pressure to act immediately. Legitimate businesses will give you time to make a decision. Anyone who pressures you to pay or give them your personal information is a scammer.

Know how scammers tell you to pay. Never pay someone who insists you pay with a gift card or by using a money transfer service. And never deposit a check and send money back to someone.

Stop and talk to someone you trust. Before you do anything else, tell someone — a friend, a family member, a neighbor — what happened. Talking about it could help you realize it’s a scam.

Report Scams to the FTC

If you were scammed or think you saw a scam, report it to the Federal Trade Commission.