Updated: June 10, 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.
Always 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 $80 billion each year, according to the Coalition Against Insurance Fraud (CAIF). Understanding 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. According to the Coalition Against Insurance 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. Always 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 clear, written justification, that's a red flag. Misleading someone into switching to a less favorable policy is illegal and should be reported.
Nearly half of all data breaches 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 and hang up and call your insurer directly.
It can sometimes be difficult to distinguish between a good and bad agent, but there are steps you can take to shield 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 the agent practices in.
Often, this will help quickly identify any past problems. 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. However, 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. 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 will have already had personal experience with an agent and be able to verify that it has been a good one so far.
Fortunately, life insurance is a buyer's market, and there's no shortage of agents who are 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.
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 recommends something that will increase what you're paying each year, get a second opinion from a respected life insurance agent.
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. Do not 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.
If you suspect you’ve fallen for a life insurance scam, act quickly to minimize financial damage and protect yourself.
Most life insurance policies include a free look period (usually 10 to 30 days) where you can cancel for a full refund with no penalty. If your policy is legitimate and you’re still within this timeframe, notify the insurer in writing and request cancellation immediately.
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. Ask if your state has a fraud bureau — they can investigate and help prevent the scammer from targeting others.
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 protect yourself and your loved ones from financial harm.
We answered common questions about life insurance scams to better understand 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. However, 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 is 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 is not 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 $80 billion annual consumer loss, 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 is 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).
