Life insurance can offer assurance and the understanding that your loved ones will be taken care of after you’re gone. But often things fail, either unintentionally or with the intent to benefit illegally, which leads to life insurance coverage scams.
There are a variety of kinds of life insurance scams – some devoted by the policyholder, and often since of deceitful representatives or other insurer employers. Let’s take a look at how it occurs.
What is life insurance fraud?
What is insurance coverage scams? Life insurance fraud takes place whenever any of the parties involved with a policy do something to take advantage of the policy in a manner that was never meant by the insurance company.
When all works right, it’s easy. If you have a term life insurance policy for $100,000 and you die, your beneficiary will get a payment for that amount. Often, however, deceitful people take actions to cheat the insurance provider out of cash. There are regularly stories in papers and publications about life insurance fraud cases, and a few of the more incredible ones get made into motion pictures or books.
More frequently, however, life insurance fraud takes place when somebody rests on an application, or an agent diverts cash being paid into a policy. These circumstances aren’t attractive, and they’re certainly illegal, but they are not unusual.
Kinds of life insurance scams
Let’s take an appearance at what are the various kinds of insurance frauds. Life insurance coverage fraud can include:
- Fabricated deaths. In these cases, people try to gather the insurance coverage of a person who’s still alive or sometimes never even existed.
- “Double Indemnity”- design plots. In the iconic 1940s film, Barbara Stanwyck and insurance coverage man Fred MacMurray plot to eliminate her husband for a big insurance payment. Today, a warning indication might be if a partner or other family member all of a sudden asks an individual to purchase or increase life insurance coverage.
- Swiped premiums. Perpetrated by dishonest agents, this type of scams involves you getting inexplicable cancellation notifications after your insurance coverage agent informs you to construct out the check for your brand-new life insurance coverage policy to him, not to the insurer. Those checks are being diverted and filched by the representative.
- Upgrade “churning.”Your representative persuades you to update to a “much better” (and more expensive) policy. It offers absolutely nothing more than the first one did, however, the agent gathers a nice commission.
- Pushing your application. This typical scam involves an individual adding inaccurate info to an application. In some cases, the medical test will highlight the error – state, if your weight is off by a few pounds in your preliminary app. Things like that occur, in some cases unintentionally. However, your potential insurance company will most likely react by offering a slightly less beneficial premium rate to you. If you have lied purposefully, you may be refused for a policy. In the end, the lie might cost you more than if you ‘d been sincere from the start.
- Forgery. Forgery takes place when somebody who is able to access the policy modifications details – most commonly, the name of the recipient. The only person allowed to do that is the policy owner.
- Fake policies. Some unethical people will claim to be insurance coverage agents and sell phony policies. They may claim to work for a national insurance provider but want you to pay premiums in advance to them straight. One tip is to just work with licensed representatives. You can ask for the license number and inspect it on your state’s licensing or insurance coverage site.
While these are the most typical, remember that new frauds may emerge as people find other methods to attempt to rip-off their method to more cash.
Life insurance fraud and fabricated deaths
Cases including fabricated deaths tend to capture the public’s fascination. Nevertheless, they’re not so typical, says personal detective Ed Webster, owner of Orion Investigations in New York, because the schemes are hard to manage.
Many faked-death insurance frauds were drawn out of the Sept. 11, 2001, terrorist attacks, as bogus insurance claims were submitted on behalf of the World Trade Center “victims” who were fictitious or lived because they ‘d been nowhere near ground no.
What individuals don’t realize is that insurance providers frequently work with investigators, private investigators, and other fraud specialists who are skilled at identifying something that does not look right when a claim is made. Insurance coverage staffers who operate in claims management are trained to ferret out disparities and lies since this sort of claim deserves a lot of cash to the insurance provider.
In the end, although it might seem like a tantalizing idea, fabricating your death will probably only make you a journey to court, not a fat claims payout.
The majority of life insurance coverage fraud involves forgery
Faked-death cases make for juicy TV news stories and ripped-from-the-headlines cable television motion pictures, and the very same might be said of murder plots for insurance coverage money. However supervisory unique agent Joshua Tison, of the insurance scams area of the Pennsylvania Workplace of Chief law officer, says most of the fraud depends on forgeries.
Someone aside from the insurance policyholder takes control of the insurance coverage policy and changes the beneficiary through “nefarious ways,” Tison explains. “That’s the bulk of the fraud we see.”
In one example from Pennsylvania, authorities accused a funeral director of altering a customer’s life insurance policy to make the funeral house the policy owner and recipient. The customer informed police she hadn’t authorized any changes. The case is still pending.
Agents implicated in some fraud schemes
Sometimes, the fraudsters are insurance coverage market experts. As explained earlier, policyholders’ premiums can be diverted, or customers can be guided into costlier policies that aren’t worth the extra cost. Or the scams can be much more elaborate.
In Minnesota, court records show that a previous life insurance company employee pleaded guilty to taking more than $1.6 million from her company by releasing phony refund checks for actual and phony customers. Federal district attorneys said a friend assisted in the scheme by cashing more than $1.1 million worth of the checks. The ex-employee apparently was sentenced previously this year to 35 months in prison, and the pal got 27 months.
Repercussions of insurance scams
The consequences of the various kinds of insurance coverage fraud range from a slap on the wrist to years in jail. If you have unintentionally made a small error on your application, for instance, there may be no real consequences other than a somewhat greater premium.
A substantial mistake on your application, on the other hand, may lead to a declined app. Any of the more objectionable kinds of fraud may result in a claim that is denied, a lot of legal trouble, and even prison time. Clearly, doing something like fabricating a death or trying to kill somebody for their policy is prohibited and will result in charges brought against you.
If you end up being suspicious that insurance coverage fraud has been committed versus you, call the authorities and your insurer. If the fraud was committed by an insurer worker, the business will undoubtedly have an internal investigation, however, the authorities might likewise be included, and you may be needed to affirm at a trial.
How to prevent life insurance coverage fraud
Preventing life insurance scams starts with due diligence on your part. Take your time when submitting an insurance application. Do not assume that a little mistake will go unnoticed. Even altering your weight by a few points – no matter how much you would like it to be a little less – can raise an issue on your application.
When searching for life insurance, work with a bonafide agent whose license depends on the date with your state’s licensing bureau. If you’re not sure, call the main company’s toll-free number to guarantee that this person works for the service provider.
Read all the great print in your policy files, no matter how boring that may be. Don’t sign anything unless you make certain you understand it. Never ever give cash straight made out to a representative – all checks need to be constructed out to the business itself.
If you have elderly family members or friends who are looking for insurance, make certain they aren’t being fleeced by a dishonest operator. Insurance coverage frauds that target the elderly are, unfortunately, typical. Your help could be the only thing that stands in between a huckster and your granny’s savings account.
If you’re lured to commit among the greater types of insurance coverage fraud – like fabricating your death – just do not. There are highly-trained individuals who will be examining the claim over carefully, and you run the risk of losing your freedom along with your financial security.
Life insurance fraud can lead to severe effects. Do whatever you can to avoid it so you get what you desire from your insurance plan.