Common Life Insurance scams
Life Insurance scams are tempting due to is the large financial potential. The following are scams that could cost you personally:
1. Stranger-Owned Life Insurance
This is a scheme in which strangers own a policy on someone’s life normally sold to them by the insured. Scammers offer money up front for a life insurance policy, normally as a loan.
If the insured dies within the first two years, the family gets the benefit, and repays the loan. If the insured didn’t die, fraudsters hope he will transfer the policy to the lender, and not repay the loan. The lender becomes the beneficiary, receiving the big payout when the insured dies. Scammers go after the elderly, as they are likely to die sooner, with better profits.
Annuities promise a future regular income. However, payouts are locked out for 10 to15 years to allow growth. Scammers get older seniors to substitute their existing annuities with new annuities – for an instant cash bonus.
Seniors may never get the bonus and are trapped in a new annuity that cannot be accessed for up to 15 years, without paying a large penalty. Even if the bonus is paid, it doesn’t counteract the inaccessible source of income.
Large annuities pays big commissions to agents. In order to get approval for a larger annuity, a scammer may increase your net worth, to appear that you can afford it. It will replace all other annuities. You end up with an unaffordable annuity – and no way to get your money without paying large penalties.
4. Bait and Switch
As Life insurance commissions are high compared to other types of insurance and whole life policies even more so. A scammer will sell you one type of policy and switch it with a whole life policy. You may find that you haven’t got what you thought you were and premiums may be higher than you expected.
5. Fake Death
Scammers fake a death to get a payout and even forge signatures on death certificates. Some take out policies on so-called “relatives” and fake their deaths. One scam operation involved a staged funeral and a coffin containing cow parts.