Life Insurance Frauds Examples

Life insurance policies are designed to provide financial protection to the loved ones of the policyholder in case of unforeseen events. However, like any other sector, the life insurance industry is also vulnerable to fraudsters who try to exploit the system for their own gains. In this journal article, we will discuss some common life insurance frauds examples and how you can avoid falling prey to them.

What is Life Insurance Fraud?

Life insurance fraud is a deliberate attempt to deceive an insurance company for financial gain. It can take many forms, such as lying on the application for insurance, faking a death, or making false claims. The consequences of life insurance fraud can be severe and can range from policy cancellation to criminal charges.

Types of Life Insurance Fraud

Following are some of the most common types of life insurance fraud:

1. Application Fraud

Application fraud occurs when an applicant provides false information on the application for insurance. For example, an applicant may not disclose a pre-existing medical condition or lie about their age to get a lower premium.

2. Ghosting

Ghosting is a type of fraud where a beneficiary fakes a death to collect the insurance payout. It can involve creating fake death certificates or arranging for someone to pose as the deceased during a funeral.

3. Stranger-Originated Life Insurance (STOLI)

STOLI is a type of life insurance fraud where investors persuade people to take out life insurance policies and then purchase them as soon as they are issued. The investors then pay the premiums and collect the death benefits when the policyholder dies. This is illegal in most states.

4. Churning

Churning is when an agent induces a policyholder to cancel their existing policy and purchase a new one to earn more commissions.

5. Policy Loan Fraud

Policy loan fraud involves taking out a loan against a life insurance policy and then making false claims to collect the insurance payout.

How to Avoid Falling Victim to Life Insurance Fraud?

Here are some tips to avoid falling prey to life insurance fraud:

1. Do Your Due Diligence

Before signing up for any life insurance policy, make sure to do your research and verify the reputation of the insurance company and its agents. You can do this by checking online reviews and ratings.

2. Read the Policy Documents Carefully

Make sure to read the policy document carefully before signing it. If you have any doubts or questions, ask the agent or the insurance company to clarify.

3. Never Lie on Application Forms

Always provide accurate information on the application form. Lying on the application form can lead to cancellation of the policy and criminal charges.

4. Keep Your Policy Up-to-Date

Make sure to keep your policy up-to-date and pay the premiums on time. If you miss a payment, your policy might lapse, and you might lose your coverage.

5. Be Wary of Unsolicited Calls or Emails

Be cautious of unsolicited calls or emails that offer insurance policies at unusually low prices. Such offers might be fraudulent.

Conclusion

Life insurance fraud is a serious offense that can have severe consequences. By being aware of the common life insurance frauds examples and taking the necessary precautions, you can protect yourself and your loved ones from falling victim to these fraudsters.