Updated: August 30, 2025
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Watch for high-pressure sales tactics, vague paperwork or unusually high returns. They’re classic signs of life insurance fraud.
Verify an agent’s license through your state’s Department of Insurance before agreeing to anything or paying premiums.
Victims of life insurance scams should report the fraud to their state insurance department and file a complaint with the fraud bureau.
Life insurance scams are a serious problem, costing consumers at least $308.6 billion each year, according to the Coalition Against Insurance Fraud (CAIF), with $74.7 billion attributed specifically to life insurance fraud. Knowing how these schemes work can help you avoid costly mistakes.
Below are the most common types of life insurance fraud and how they put your money and personal information at risk.
Many life insurance agents earn commissions based on how much you spend, not necessarily what's best for your needs. This creates an incentive to sell more expensive policies or add-ons that may not provide real value. One common tactic is encouraging optional riders that raise your premium without offering meaningful benefits, especially as you age. Watch out for upsells like:
The insurance industry's dirty little secret is that they are not required to disclose commissions on any products that they sell to consumers. If a consumer does not ask, they don't have to tell.
— Scott Page, retirement expert and author of It's Never Too Late: Getting Older, Wiser, and Worry Free in Our Golden Years
While most agents are honest, some engage in outright fraud. Scams can range from collecting premiums for policies that don't exist to pocketing the difference between what you were quoted and what the insurer actually charges.
In some cases, a rogue agent may quote a policy but never submit the application, leaving your loved ones to discover the policy doesn't exist only after a claim is filed. Others may inflate premiums and keep the extra cash.
Seniors are often targeted in these scams because they may be more trusting or less likely to question details. Scammers sometimes even pose as affiliated with legitimate companies to build false trust. Verify your policy directly with the insurance company, not just through your agent.
Churning occurs when an agent convinces you to replace an existing life insurance policy with a new one, not to benefit you, but to earn another commission. This can result in higher costs, reduced benefits or the loss of valuable policy features.
Ethical agents will provide full documentation comparing the old and new policies and explain how the switch benefits you. But if an agent pressures you to change without a clear, written justification, that's a red flag. Misleading someone into switching to a less favorable policy is illegal and should be reported.
The National Insurance Crime Bureau reports that identity theft affects millions of Americans annually and estimates that identity theft-related crimes will grow by almost 50% by the end of 2025.
Data breaches often involve stolen personal data, and scammers increasingly use fake life insurance calls to gather information. These fraudsters may pretend to represent your insurer and use tactics like:
Once they have your information, they may make small purchases using your card or open new accounts under your name.
Identity theft tied to life insurance scams can destroy your credit and take months to fix. If you get a suspicious call, never share personal details, hang up and call your insurer directly.
STOLI schemes involve investors buying life insurance policies on strangers, then selling them to third parties who pay premiums and collect death benefits. These arrangements violate the principle that you must have an insurable interest in the person you're insuring.
Investors may approach you directly, offering to pay for a large policy in exchange for eventually transferring ownership to them. They present this as "free insurance," but these arrangements often violate state laws and can void your coverage entirely. Watch for someone approaching you about taking out a large policy with promises to pay premiums, investors offering to "loan" you money for policy premiums with strings attached, or pressure to transfer policy ownership after a waiting period.
In a legal life settlement, you may choose to sell your own life insurance policy after holding it for a period of time. In STOLI, outside investors initiate the policy from the beginning, which makes it illegal in most states and subject to being voided.
Fraudsters send fake text messages or emails claiming to be from your insurance company, requesting personal information or immediate payment to avoid policy cancellation. These digital scams have increased in recent years, targeting both new applicants and existing policyholders.
Common tactics include urgent messages about policy problems, fake renewal notices, or "limited-time" offers requiring immediate action. The goal is to collect your personal information for identity theft or trick you into making payments to fraudulent accounts. Be suspicious of urgent messages demanding immediate action, requests for Social Security numbers via text or email, or links to websites that don't match your insurer's official domain.
Criminals target elderly policyholders to change beneficiaries without family knowledge, often through caregiver relationships or romance scams. They gain the policyholder's trust over time, then convince them to update their policy beneficiaries to benefit the scammer instead of legitimate family members.
These scams particularly affect isolated seniors who develop close relationships with caregivers, new romantic partners, or "helpful" neighbors who gradually insert themselves into financial decisions. Warning signs include sudden beneficiary changes involving new relationships, caregivers discouraging family involvement in financial decisions, or pressure to make changes without family consultation.
Dishonest agents collect premium payments but pocket the money instead of forwarding it to the insurance company. Your policy lapses without notification, leaving you unprotected despite believing you're covered and making regular payments.
This fraud often goes undetected for months or years until you try to file a claim or receive a lapse notice directly from the insurer. By then, significant damage may have occurred, and recovering stolen premiums can be difficult. Be wary of agents requesting cash payments, reluctance to provide official receipts, or premium amounts that seem inconsistent with quoted rates.
Criminals create fake insurance documents or alter legitimate policies to inflate coverage amounts for fraudulent claims. This sophisticated fraud often involves forging signatures, medical records, or policy terms to make illegitimate policies appear valid.
Forgery can affect both applicants and beneficiaries. Scammers may create entirely fictitious policies or modify existing coverage amounts to support larger fraudulent claims after a death occurs. Watch for documents with inconsistent formatting, policy terms that seem unusually generous, or reluctance from agents to provide original documentation directly from the insurer.
Recognizing scam warning signs can protect you from fraudulent schemes and financial loss. Watch out for these warning signs in common scam scenarios:
If you notice any of these warning signs, stop the transaction immediately and contact your state insurance department to verify the agent's credentials and report suspicious activity.
It can sometimes be difficult to distinguish between a good and bad agent, but you can protect yourself from life insurance scams as you look for the best life insurance policy:
Independent brokers have become more popular, especially since the internet has made it easy to sign up and get recommendations. An independent broker shops multiple insurance providers to provide the best price to meet your needs.
The internet can help you learn about an agent before signing any documents. One resource to check is the Department of Insurance website specific to the state in which the agent practices. This should be your first verification step before making any policy decisions. It will help you quickly identify any past problems, complaints or disciplinary actions.
Make sure the agent has an active license with no reported sanctions, preferably over many years.
The mere fact that an agent is with a well-known agency doesn't guarantee reliability. You can verify an agency's reputability by reading reviews and learning more about it.
If you're working directly with an agent, don't hesitate to contact that agent's insurance company to verify what you're hearing. Ask to confirm the agent's employment status, the policy terms being quoted, and whether the premiums match what the agent presented.
If it's a respected agency and they can vouch for the agent's reputability, you can move forward with more confidence.
Friends and family can be invaluable in identifying a trustworthy agent. They'll have already had personal experience with an agent and be able to verify that it has been a good one so far.
Life insurance is a buyer's market, and there's no shortage of agents willing to give a quote. One of the best ways to get a feel for the many options is to price and compare multiple life insurance policies.
You can then compare what you're being offered and easily identify any scams. If someone is promising something much more for the same price, or even lower than other insurers, that may be a sign that something is amiss.
Before signing with an insurer, read over all documentation carefully and identify any terms that might cause problems in the future. Ensure your policy documents detail the coverage you're getting for the premiums you're paying.
Most states require a "free-look" period of 10-30 days after policy delivery, during which you can cancel without penalty. Use this time to review all documents carefully and verify coverage details with the insurance company.
Once your insurance policy is in place, you'll still need to be vigilant, especially if your agent suddenly suggests making a major change to your policy. If your agent is recommending something that will increase what you're paying each year, get a second opinion from a respected life insurance agent.
If you receive a call, email or other communication about your policy, contact your agent or life insurance agency to discuss it. Don't give out payment information, contact details or your Social Security number unless you're 100% certain you're speaking to a trusted representative from a service you use.
Whenever possible, make premium payments directly to the insurance company, not to individual agents. If you must pay through an agent, use checks made payable to the insurance company, not the agent personally. Request and keep official receipts for all payments.
If you suspect you’ve fallen for a life insurance scam, act quickly to minimize financial damage and protect yourself.
If you’re outside the free look period, read the policy’s cancellation terms carefully. You likely won’t get your premiums back, but you should be able to exit without fees. Make sure you have a new policy lined up before canceling to avoid a gap in coverage.
If you suspect the insurer or agent is fraudulent, stop any auto-payments linked to the policy. Keep a close eye on your bank or credit card statements for unauthorized charges. Fraudulent agents may claim they’ve canceled your policy but continue billing you.
Collect emails, texts, payment records, signed documents, and any communication that shows misleading or deceptive behavior. This will help support your case when reporting the fraud.
File a formal complaint with your state’s Department of Insurance. If the agent is licensed, they may be disciplined or have their license revoked. Check if your state has a fraud bureau. They can investigate and help prevent the scammer from targeting others.
Life insurance itself isn't a scam. It's a legitimate financial product that provides essential protection for millions of families, but the industry does attract fraudulent actors who exploit consumers through deceptive practices.
Legitimate life insurance serves a clear purpose: it provides financial security for your beneficiaries when you die. Licensed insurers undergo strict regulatory oversight, maintain substantial financial reserves, and must honor valid claims. The industry processes billions in legitimate claims annually, helping families cover funeral costs, pay off debts, and maintain their standard of living.
The confusion often stems from aggressive sales tactics or misleading marketing. Some people view whole life insurance as a "scam" because of high fees and complex terms, which reflects poor product fit rather than fraud. Similarly, term life insurance that expires without a payout isn't fraudulent. It simply means the coverage wasn't needed during the policy term.
On this page, we explained how to recognize common life insurance scams, from agent fraud to identity theft, and what to do if you’re targeted.
Life insurance fraud costs consumers billions each year, but understanding how scams work can help you shop smarter. By researching agents, reading the fine print and staying alert to red flags, you can provide financial protection for yourself and your loved ones from financial harm. Consult with licensed insurance professionals and verify agent credentials through your state's Department of Insurance before making policy decisions.
We answered frequently asked questions about life insurance scams to understand better how to recognize fraudulent practices and protect your financial interests.
Life insurance fraud involves deliberate deception to gain unlawful financial benefits from insurance transactions. This could include issuing fake life insurance policies, inflating insurance claims or manipulating policyholder information to procure benefits illicitly.
No, life insurance is a legitimate financial instrument designed to protect your loved ones financially upon your death, but life insurance scams exist, so stay alert. Always conduct thorough research and confirm the insurer's legitimacy before purchasing a policy.
Term life insurance is a legitimate form of life insurance that provides coverage for a specified term. It’s not a scam. To avoid misleading offers or terms, carefully understand the policy's terms and ensure the insurer is reputable.
While whole life insurance scams are possible, whole life insurance itself is a genuine product offering a death benefit and savings component. Investigate the policy details thoroughly and check the insurer's credibility to ensure you're not being misled.
Legitimate life insurance isn't a pyramid scheme, although fraudulent entities might misuse the concept to deceive consumers. Distinguish reputable insurers from those running illicit schemes to protect your investments.
Selling life insurance is a legitimate career supported by strict industry regulations. Nonetheless, unethical practices such as life insurance churning can occur. Deal with trustworthy and well-reviewed agents to ensure ethical transactions.
To verify a life insurance company's legitimacy, review its licensing status via your state's Department of Insurance website and examine its financial stability ratings from recognized independent rating agencies. These steps help ensure that the company is financially sound and operates legally.
Why Trust MoneyGeek?
MoneyGeek provides accurate, research-backed information to help consumers make informed decisions about life insurance. For this guide, we consulted licensed insurance professionals and analyzed insights from consumer protection agencies to outline the most common life insurance scams and how to avoid them.
Recency
All information in this guide was reviewed and updated in 2025 to reflect the latest tactics used by scammers and the most current fraud prevention practices.
Sources and Expert Input
To ensure factual accuracy, we drew on verified insights from the Coalition Against Insurance Fraud (CAIF), the National Association of Insurance Commissioners (NAIC), state departments of insurance and other authoritative bodies. We also interviewed licensed life insurance professionals to understand how scams occur and how buyers can avoid them.
Fraud and Scam Data
Statistics on insurance fraud, including the estimated $308.6 billion annual consumer loss from insurance fraud and $74.7 billion loss from life insurance fraud, were sourced from CAIF and publicly available industry reports. We also referenced identity theft trends from FTC data and included best practices from state fraud bureaus.
Editorial Standards
All MoneyGeek content undergoes a rigorous editorial review process. Expert contributors review pages for clarity, accuracy and real-world relevance, especially on topics that affect consumer finances and long-term planning.
Scope and Purpose
This page is intended to educate life insurance shoppers about common scams and fraudulent practices, provide prevention tips and explain actionable steps if fraud occurs. It’s not a substitute for legal advice.
Readers facing fraud should report the issue to their state's Department of Insurance or fraud bureau for investigation.
If you believe you've been a victim of life insurance fraud, here are a few resources that can help you:
National Association of Insurance Commissioners
The NAIC provides regulatory support to create the standards and best practices of the insurance industry.
State Insurance Fraud Bureaus
The Coalition Against Insurance Fraud has created this directory of where to report fraud in each state.
National Insurance Crime Bureau
The NICB is a not-for-profit organization dedicated to preventing, detecting and deterring insurance fraud and crime.
State Statutes on Insurance Crime
The Coalition Against Insurance Fraud lists the state statutes that involve insurance fraud.
FBI Internet Crime Complaint Center
This page allows people to file complaints about Internet crime, including identity theft and computer hacking.
Better Business Bureau
The BBB has a search tool that helps consumers find information on businesses, including a BBB trustworthiness rating and any complaints the business has received.
About Stephanie Faris
Stephanie Faris is a freelance writer whose work has appeared on the Intuit Small Business Blog, Ecommerce Insiders, and many other business sites. She is also a fiction author, including 30 Days of No Gossip, 25 Roses, and the upcoming Piper Morgan series (all from Simon & Schuster).
