Life Insurance is a necessity for many families, offering them financial security and peace of mind in the wake of unfathomable losses. With a rise in Americans investing in life insurance, there’s a wealth of legitimate, emerging agencies, benefit packages, and alternative options for them to choose from.

But with a rise in accessibility and affordability, it can be hard to distinguish a good option from those out to make a quick buck on someone’s worst nightmare. How can you protect yourself and your family? What are the tell-tale signs of a life insurance scam? Here are the top 5 most common types of life insurance scams and how to spot them.

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“Life insurance fraud costs the United States insurance industry an estimate $10 and $20 billion in financial losses annually.”

source: Investigating Life Insurance Fraud and Abuse (

Policy Switching

What it is: policy switching is when scammers offer to lower your premium while promising the same benefits or better but move you to a policy that has little to no coverage at all.  Sometimes, this takes the form of moving you from one type of life insurance to another, such as a permanent life insurance policy, which comes with a higher commission for the agent. This scam especially preys on those who have little knowledge of insurance and are likely to agree without viewing the new terms or understanding the value of the benefits.

How to avoid it: always review the terms for any changes to your insurance policies, including cost. A legitimate insurance agent and agency will normally provide updated coverage details and explain the difference. This means, at the very least, a new agreement must be drawn up and reviewed. If possible, have a financial advisor or a family member knowledgeable about insurance policies review the new terms before proceeding. If no such terms are provided, do not agree to anything, or make any payments.

In some instances, such as with employee benefits, you may not have access to the policy to review in advance. In this case, there should always be a “look back period” where you can review the policy within a specified period of time to determine if it is truly right for you. Pay attention to this time period, which could vary by insurance carrier, and be sure to review within the specified period of time. It’s also important to know the difference between a permanent and a term life insurance policy, as this will not only help you understand which is best for you, but also the value of what you’re getting.

Overselling Policies

What it is: when an insurance agent tacks on additional coverage and benefits you didn’t ask for, or when they pressure you to accept additional benefits and up-play the value of them, that’s called overselling a policy. While legitimate agents will certainly discuss valuable add-on benefits, a scammer will exaggerate the value of the benefits while claiming the cost is affordable. They likely won’t review limitations and restrictions of those add-ons, either.  In reality, you may be paying more for benefits you more than likely do not need.

How to avoid it:  the best way to avoid scams like this is to work with a licensed and trustworthy insurance agent or agency. Do thorough research to determine whether they’re worth getting insurance through. Always compare the value of what they’re offering to other add-ons in the market. Do the prices align? Verify the agent’s legitimacy with your state insurance department. A good insurance agent wouldn’t plug add-ons to you unless your situation warrants it, and they’d make sure you understood the value, restrictions, and limitations of those additional benefits.

Free illustrations of Fraud

Pocketing Premiums

What it is: it is illegal for a life insurance agent to pocket your money instead of paying the premium forward to the insurance company, but this type of scam happens more often than you realize.

How to avoid it: first, avoid paying any insurance agent or agency that you cannot verify through your state insurance department. Second, even if they are licensed, never send payments through P.O. Box, wire transfers, email, money orders, online platforms like Venmo, or gift cards. None of these are professional channels and are suspicious.

Fake Policies

What it is: this type of fraud occurs when scammers sell life insurance policies without a license, which is a felony offense, and pocket the premiums before disappearing. This leaves the victims without insurance and their hard-earned cash.

How to avoid it: Though research can be tedious, it’s vital to conduct a thorough check on anyone claiming to be an insurance agent. Before signing up for a policy and paying for anything, be sure to check in with your state insurance department to make sure an agent and their agency are legitimate.

Identity Theft

What it is: when scammers contact you under the guise of an insurance policy issued to gain personal and financial information from you. In most cases, this is reaching out via email or phone regarding “issues processing payments”, claims that changes have been made to your policy that must be confirmed, and/or benefits are about to expire. There is often a sense of urgency, which accompanies compelling and realistic reasons that would prompt you to contact them.

How to avoid it: when dealing with anyone making these types of claims, a healthy dose of skepticism is warranted. Double check the agent is licensed and legitimate. Know your own life insurance policy and if you pay the carrier directly or a third-party administrator. Ask various questions about your policy to gauge if they can explain it to you. Remember: never give personal and financial information over the phone or by email if you are unsure who you are communicating with.

The Bottom Line of Life Insurance

Life Insurance scams have been on the rise in the United States and threaten not only your financial security, but also your personal identity. The best way to lower the odds of falling prey to a Life Insurance scam is to always harbor a kernel of skepticism and to familiarize yourself with the benefits you have. In most cases, scammers prey predominately on that lack of knowledge and confidence surrounding your own life policy. Protect what is yours by hitting pause, reviewing your benefits, doing a little bit of research, and always asking questions. Remember: a legitimate agent will usually understand and respect your hesitation; a scammer won’t. But caution is advisable no matter who you’re getting insurance through.

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Sources Cited:

Investigating Life Insurance Fraud and Abuse (

Life Insurance Scams (FULL LIST 2021) – Scam Detector (

20+ Unbelievable Insurance Fraud Statistics You Need to Know (

8 Common Life Insurance Scams and How to Avoid Them – Experian

Types of life insurance: Which policy is right for you? |

The Biggest Life Insurance Scams | MoneyUnder30