You can avoid most life insurance scams. Learn how to vet agents, compare offers, read documents and spot red flags before you commit.
Find out more about life insurance fraud and common scams below.
Updated: January 22, 2026
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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 must report the fraud to their state insurance department and file a complaint with the fraud bureau.
Insurance scams cost consumers at least $308.6 billion each year, according to the Coalition Against Insurance Fraud (CAIF). Life insurance fraud accounts for $74.7 billion of that total.
Common life insurance scams threaten your money and personal information:
Many life insurance agents earn commissions based on how much you spend, not what's best for you. They're motivated to push expensive policies or add-ons you don't need. Agents often recommend optional riders that raise your premium without providing real value, especially as you get older. 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
Most agents are honest, but some engage in outright fraud. Scams range from collecting premiums for policies that don't exist to pocketing the difference between what you were quoted and what the insurer charges.
Sometimes, a rogue agent quotes a policy but never apply it, 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.
Scammers target the elderly because seniors tend to trust more and question less. Scammers fake affiliations with legitimate companies. Verify your policy directly with the insurance company, not through your agent.
Agents churn policies by convincing you to replace existing coverage with new policies for commission earnings. You pay more, get fewer benefits or lose valuable policy features.
Ethical agents give you full documentation, comparing your old and new policies, and explain exactly how the switch helps you. If an agent pressures you to switch without a clear, written justification, that's a red flag. Misleading someone into a worse policy is illegal, so report this behavior.
The National Insurance Crime Bureau reports that identity theft affects millions of Americans each year, and these crimes are projected to grow by almost 50% by the end of 2025.
Scammers use fake life insurance calls to steal personal data from data breaches. These fraudsters pretend to represent your insurer and use tactics like:
Once they get your information, they make small purchases with your card or open new accounts in your name.
Identity theft from life insurance scams destroys your credit and takes months to fix. If you get a suspicious call, don't share personal details. Hang up and call your insurer directly.
STOLI schemes happen when investors buy life insurance on strangers, then sell the policies to third parties who collect the death benefits. This violates the basic rule that you need an insurable interest in the person you're insuring.
Scammers may offer to pay for a large policy if you eventually transfer ownership to them. They call it “free insurance,” but these deals often break state laws and can void your coverage. Be careful of 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.
Legal life settlements let you sell policies you've owned for years. STOLI differs completely. Outside investors fund policies from day one, betting on your death.
Most states ban this practice and void these policies.
Fake emails or texts pretend to be your insurance company, demanding immediate payment to prevent cancellation or requesting personal information for “account verification.”
Watch out for urgent policy problem messages, fake renewal notices or “limited-time” offers. These scams steal your identity or trick you into sending money to fraudulent accounts.
Seniors get targeted for beneficiary changes without family knowledge. Scammers build trust through caregiver relationships or romance scams, then convince policyholders to name them as beneficiaries instead of family. Isolated seniors risk this most.
Dishonest agents collect premium payments but pocket the money instead of forwarding it to the insurance company. Your policy lapses without notification, leaving you uninsured despite regular payments.
Discovery happens when you file a claim or receive a lapse notice from the insurer. Recovering stolen premiums proves difficult. Warning signs are cash payment requests without official receipts or premium amounts that don't match quoted rates.
Fake insurance documents or altered legitimate policies inflate coverage amounts. Forged signatures, medical records or policy terms make illegitimate policies appear valid.
These scams affect both applicants and beneficiaries. Fictitious policies or modified coverage amounts support larger fraudulent claims after death. Red flags include inconsistent document formatting, unusually generous policy terms or agents refusing to provide original documentation from the insurer.
Beneficiaries sometimes file fraudulent claims using falsified death certificates or fabricated evidence to collect payouts while the insured is still alive. Insurers investigate suspicious claims, especially large payouts or deaths occurring shortly after policy purchase. These schemes carry serious criminal penalties, including imprisonment for fraud and murder charges in violent cases.
Name trusted beneficiaries and inform family members about policy details. Be cautious if someone pressures you to increase coverage or change beneficiaries unexpectedly.
Watch for these warning signs to protect yourself from fraudulent schemes and financial loss:
Notice any warning signs? Stop the transaction immediately. Contact your state insurance department to verify agent credentials and report suspicious activity.
Distinguishing between a good and bad agent can be difficult, but you can protect yourself from life insurance scams as you look for the best life insurance policy:
Independent brokers shop multiple insurance providers to get you the best price for your needs. The internet makes it easy to sign up and get recommendations.
Use your state's Department of Insurance website to research an agent before signing any documents. Check here first to identify any past problems, complaints or disciplinary actions.
Confirm the agent has an active license with no reported sanctions and several years of experience.
An agent from a well-known agency doesn't guarantee reliability. Verify an agency's reputation by reading reviews and researching its history.
If you're working directly with an agent, contact that agent's insurance company to verify what you're hearing. Ask to confirm the agent's employment status, the quoted policy terms and whether the premiums match what the agent presented. If it's a respected agency and they vouch for the agent, you can move forward confidently.
Friends and family can help identify 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. Price and compare multiple life insurance policies to get a feel for your options. You can compare what you're being offered and easily identify scams. If someone promises much more for the same price, or even lower than other insurers, something's wrong.
Before signing with an insurer, read over all documentation carefully and identify any terms that might cause problems later. Make sure your policy documents detail the coverage you're getting for the premiums you're paying.
Most states require a "free-look" period of 10 to 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, stay vigilant, especially if your agent suddenly suggests a major policy change. If your agent recommends something that increases what you're paying each year, get a second opinion from a respected life insurance agent.
If you receive an email, a call 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.
Make 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.
*Insurance regulations and agent licensing requirements vary by state. Always verify requirements with your state's department of insurance.
Discovering you've been scammed feels overwhelming, but quick action limits your financial losses. Your response depends on timing. You may qualify for a full refund, or you may need to cut ties and report the fraud. Either way, document everything and file complaints with the right agencies.
Act immediately if you've been scammed. Most life insurance policies include a free-look period, 10 to 30 days from policy delivery, when you can cancel for a full premium refund. Contact the insurance company in writing to cancel within this window.
If you're outside the free-look period, read the policy's cancellation terms carefully. You won't get your premiums back, but you should be able to exit without fees. Line up a new policy before canceling to avoid a coverage gap.
If you suspect the insurer or agent is fraudulent, stop any auto-payments linked to the policy. Watch your bank or credit card statements closely for unauthorized charges. Fraudulent agents claim they've canceled your policy but keep billing you.
Collect emails, texts, payment records, signed documents and any communication that shows misleading or deceptive behavior to 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 investigate and help prevent the scammer from targeting others.
Life insurance isn't a scam. It's a legitimate financial product that provides financial protection for millions of families, though the industry attracts fraudulent actors who exploit consumers through deceptive practices.
Legitimate life insurance provides financial security for your beneficiaries when you die. Licensed insurers undergo strict regulatory oversight, keep substantial financial reserves and must honor valid claims. The industry processes billions of dollars in legitimate claims every year, helping families cover funeral costs, pay off debts and keep their standard of living.
Aggressive sales tactics or misleading marketing create confusion. Some consumers view whole life insurance as a "scam" because of high fees and complex terms, but that's poor product fit, not fraud. Term life insurance expiring without a payout isn't fraudulent either. You simply didn't need coverage during the policy term.
Life insurance scams cost consumers billions yearly. Research agents, read fine print and be careful of red flags to protect yourself and loved ones from financial harm. Verify agent credentials through your state's insurance department and consult licensed insurance professionals before making policy decisions.
We answer common questions about life insurance scams:
Deliberate deception to gain unlawful financial benefits from insurance transactions. Fraud includes issuing fake policies, inflating claims or manipulating policyholder information to collect benefits illegally.
No. Term life covers you for a specific period (usually 10 to 30 years) and pays out only if you die during that time. Confusion comes when policies expire without paying out, but that's how term coverage works by design. Read policy terms carefully and check the insurer's license before buying.
No, though high fees and complex terms make some people suspicious. Whole life builds cash value over time alongside a death benefit, making it more expensive than term coverage. Scams involving whole life exist. Review policy details and check the insurer's financial strength through A.M. Best ratings.
No. Pyramid schemes pay people for recruiting others, not for selling actual products. Licensed insurance companies sell real policies regulated by state departments. Some scammers do disguise pyramid schemes as insurance opportunities, so verify any company's license and check its complaint history before getting involved.
No, it's a regulated career requiring state licensing. Problems happen when agents prioritize commissions over your needs, pushing unnecessary policies or expensive riders. Check your agent's license status and complaint record through your state's insurance department, and get a second opinion if they pressure you to buy immediately.
Start with your state insurance department's website to verify the company holds an active license. Then check its financial strength ratings from AM Best, Moody's or Standard & Poor's. Look for ratings of A- or higher. These steps confirm the company operates legally and has the financial reserves to pay claims when you need them.
If you've been a victim of life insurance fraud, these resources can help:
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).
