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 30, 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 operate honestly, but fraud happens. Scams include collecting premiums for nonexistent policies or pocketing the gap between your quoted rate and the actual insurer charge.
In some cases, a dishonest agent quotes a policy but never submits the application. Your family only discovers the policy doesn't exist when they file a claim. Other agents inflate your premiums and pocket the difference.
Seniors often become targets because they're more trusting and less likely to question authority figures. Fraudsters frequently claim fake connections to well-known insurance companies. Always verify your policy directly with the insurer. Never rely solely on what your agent tells you.
Some agents churn policies by pushing you to replace existing coverage with new ones so they can earn fresh commissions. You end up paying more, receiving fewer benefits or losing valuable policy features.
Honest agents provide complete documentation that compares your current and proposed policies. They explain exactly how the switch benefits you. An agent who pressures you to switch without clear, written justification is waving a red flag. Misleading someone into an inferior policy breaks the law, so report this behavior immediately.
The National Insurance Crime Bureau reports that identity theft affects millions of Americans each year, with cases projected to rise by nearly 50% by the end of 2025.
Scammers often use fake life insurance calls to steal personal information obtained from data breaches. These fraudsters pose as insurance representatives and rely on tactics such as:
Once scammers collect your information, they may run small charges on your card or open new accounts in your name. Identity theft tied to life insurance scams can damage your credit and take months to fix.
If you receive a suspicious call, avoid sharing personal details. Hang up and contact your insurer directly using an official phone number.
STOLI schemes work like this: investors purchase life insurance on strangers, then flip those policies to third parties who collect when the insured person dies. This breaks a fundamental insurance rule. You must have an insurable interest in the person you're covering.
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 prohibit this practice and cancel these policies.
Fake emails or texts claim to be from your insurance company. They demand immediate payment to avoid cancellation or ask for personal information to verify your account.
Be wary of messages about urgent policy problems, fake renewal notices or time-sensitive offers. These scams either steal your identity or trick you into wiring money to fraudulent accounts.
Scammers target seniors to change beneficiaries without family knowledge. They build trust by posing as caregivers or romantic partners, then persuade policyholders to name them as beneficiaries instead of family members. Isolated seniors face the highest risk.
Dishonest agents collect your premium payments but pocket the money instead of sending it to the insurance company. Your policy lapses without warning, leaving you uninsured even though you've been paying regularly.
You only find out when you file a claim or get a lapse notice from the insurer. Recovering stolen premiums is tough. Watch for warning signs like requests to pay in cash without official receipts or premium amounts that don't match your quoted rates.
Fraudsters create fake insurance documents or alter real policies to inflate coverage amounts. They forge signatures, medical records or policy terms to make illegitimate policies look valid.
These scams hurt both applicants and beneficiaries.
Fake policies or inflated coverage amounts lead to bigger fraudulent claims after death. Red flags include inconsistent document formatting, suspiciously generous policy terms or agents who won't provide original documentation from the insurer.
Some beneficiaries file fraudulent claims using fake death certificates or fabricated evidence to collect payouts while the insured person is still alive. Insurers investigate suspicious claims, particularly large payouts or deaths that happen soon after someone buys a policy.
These schemes lead to serious criminal penalties, including prison time for fraud and murder charges when violence is involved. Name trustworthy beneficiaries and tell family members about your policy details. Stay alert if someone pushes you to increase coverage or change beneficiaries without a good reason.
Look for these warning signs to protect yourself from scams 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 protects millions of families, though the industry does attract fraudsters who exploit consumers through deceptive practices.
Legitimate life insurance provides financial security for your beneficiaries after you die.
Licensed insurers face strict regulatory oversight, maintain substantial financial reserves and must honor valid claims. The industry processes billions of dollars in legitimate claims annually, helping families cover funeral costs, pay off debts and maintain their standard of living.
Aggressive sales tactics or misleading marketing cause confusion. Some consumers call whole life insurance a scam because of high fees and complex terms, but that's a poor product match, not fraud. Term life insurance expiring without a payout isn't fraudulent either. You simply didn't need the coverage during your 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).
