How to Avoid Life Insurance Scams
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Last updated: 08/06/2023 | Estimated Reading Time: 10 minutes

When you’re looking for the best life insurance for your specific needs, it’s difficult to know what’s trustworthy and what isn’t as you look into the different types of life insurance available to you. 

Becoming a victim of life insurance scams is an understandable concern to have considering all of the personal details a policyholder needs to provide to their life insurance companies.  Unfortunately, scammers operate in every line of business, and it’s vital that we all remain vigilant in order to protect ourselves and others from potential life insurance fraud. 

But how can you find a way to avoid any suspicious activity when choosing a new policy? And how are you going to be able to identify life insurance companies that aren’t to be trusted? 

In this guide, you’ll discover a few tips on how to spot common life insurance scams and avoid being the victim of life insurance fraud, and how to reduce the risk of exposing yourself to potential criminals by choosing a legitimate company.

In This Guide:

Is Life Insurance a Scam?

Life insurance can provide a wide range of benefits for many people. And life insurance coverage is in no way created for the sole purpose of deception and scams. However, in order to find the best life insurance for your specific needs, you’ll need to be able to know exactly what you’re getting and how it can be of benefit to you. 

In other words, life insurance is not a scam, it’s just not for everyone. As long as you understand the upsides of paying your monthly premium and the potential life insurance payout that comes with it, you probably already have the right life insurance policy for your needs. 

On the other side of the coin, if you can’t see how any kind of life insurance coverage would benefit you or your loved ones, then you’d probably not benefit from taking one out. As with most things in the world, the problems come from people looking to part you from your money while throwing any old coverage your way.

Common Life Insurance Scams

The advancement of technology has provided fraudsters with more avenues than ever to target people and their contact details. And when it comes to spotting a life insurance scam, UK residents need to be mindful of some of the most common life insurance scams out there. 

If you’re looking to find new coverage or take out a new policy, you may encounter the following issues and scams.

1. Forgery 

Forgery scams predominantly revolve around an insurance agent faking your own personal signature in order to gain access to your account. Once this has been done, these scammers will have the ability to access important accounts and change the beneficiaries listed on the policy.

You can avoid these kinds of forgery scams by maintaining a strict annual policy review that ensures no changes have been made without your permission. You should be perfectly fine if you’re working with life insurance companies with a strong reputation who are FCA registered. 

2. Fake Policies 

Some life insurance fraud comes in the form of a completely phoney policy. In order to do this kind of life insurance scam, UK scammers will sell people fake policies and then keep the insurance premiums paid on that policy. 

Scams of this nature can be avoided by doing your research before dealing with any life insurance companies. Check that the agent you’re talking to is fully licensed and qualified before parting with any money or personal details. 

3. Fake Contacts

Insurance scammers can also contact you under a false identity and say that there’s an issue with your current life insurance coverage. They will then ask for personal information and cash in order to keep the policy running. 

The best way to avoid these kinds of life insurance scams is to quickly hang up or ignore any other correspondence before calling your insurance company on the official numbers you have. Never give out your personal information and be sure to check with your insurers about the legitimacy of this contact. 

4. The Policy Switch 

Scams of this nature try to get your attention through offers of a reduced premium on your policy. However, what they actually do is switch you to a policy with much lower coverage by posing as an insurance agent who is simply looking to get you a great deal. 

To avoid being the victim of this kind of life insurance fraud, it’s always best to refuse any changes to your policy without having it written out officially on paper. 

5. Fee Churning 

Fee churning is when a fraudulent life insurance company or agent tries to lure you with a cash value bonus to use up the money value of your policy to buy more insurance or change policies. The scammers will earn a commission for doing this, while your policy remains no better than your previous one, just perhaps more expensive. 

Avoiding life insurance scams like this comes down to things like openly asking the insurance agent if they are going to get a commission for this policy change, and making sure you’ve understood every last benefit and restriction of the proposed new policy. 

6. Beneficiary Scams 

Life insurance fraud can also target peoples’ emotions in order to catch them off-guard when a family member has recently passed. Scammers will look at the latest obituaries to find people they can phone or email and tell them that they’ve been named as the beneficiary of a deceased person’s policy.

They’ll tell a mourner that there’s a payment due to them but they will first need to make a payment on the outstanding premium balance. Unfortunately, many people who are blindsided by grief will then provide their credit card number or other sensitive information to someone that claims to be a representative of an insurance company. 

Life insurance scams of this nature can be avoided by checking any documents that the recently deceased has left behind. You should also make sure you look further into the company an agent claims to be a part of before making any payments. 

7. Premium Diversion

Essentially, premium diversion refers to the act of an insurance agent taking your premium payments and keeping the funds for themself instead of giving them to the company.

Scams like this can be avoided by treading carefully if an insurance agent asks you to make a payment made out to them personally. Wire transfers, P.O. Box numbers, and money orders are also potential red flags.

Ways in Which Fraudulent Life Insurance Agents may Contact You

It’s important to note that while the following avenues of contact are used by reputable and legitimate life insurance agents, they’re also used by fraudulent agents looking to take as much as they can about your personal or financial information. 

Emails

An email scam usually includes the act of email phishing, which is when fake life insurance companies or agents attempt to get more information about you and your identity to commit fraud. 

This usually comes in the form of an unsolicited email from someone claiming to be from a life insurance company. They may contact you to claim a problem with your policy or even take the beneficiary scam route instead. 

Emails of this nature can look perfectly legitimate. In general, it’s best to avoid clicking on any suspicious links and putting your own devices in danger.  

A Cold Call

Another life insurance scam UK residents need to be wary of is over the phone. Fraudsters may call someone pretending to be from a life insurance company in order to obtain information about their identity and finances.

Posing as fake life insurance agents, they attempt to earn the trust of the person they’ve called before asking them for passwords, PINs, or other information over the phone. 

How to Spot Scammers and Life Insurance Fraud

Before choosing a new life insurance policy or trusting the word of a stranger over email or telephone, ask yourself the following question: 

  • Are they unable to send proof of identity?
  • Does the offer sound too good to be true? 
  • Have they asked for a lot of personal information?
  • Have you done an online search for the number they called from?
  • Are there any spelling mistakes or random links to enter bank details?

Ways to Avoid Life Insurance Scammers

In any life insurance scam, UK residents are advised to protect themselves from a fraudulent life insurance policy by keeping to these key points (as well as the questions asked above). 

  • Be cautious of any correspondence that will claim to have a surprise payout or any life insurance policy offering a sudden significant drop in premium prices. 
  • Refuse to pay any insurance premiums or other fees via methods like wire transfers, money transfer apps, or prepaid cards. Make your payment through trusted and official channels.
  • Be mindful of giving out your contact or credit card details when talking to someone you suspect isn’t a true life insurance agent, even if it’s in reference to discussing any potential new accounts.
  • Don’t get pressured into agreeing to anything with an insurance company without taking the time to get a second opinion. Make sure no pay is given until you’ve got the life insurance policy details in writing. Reading reviews is also a great way of checking the validity of a company or agent.

Fraudulent Life Insurance Policies: What to do Next

Fraud and identity theft are not to be taken lightly. Insurance agents should guide and inform a policyholder and not pressure them into giving out sensitive information. If you think you’ve been part of a fraudulent life insurance policy scheme, here are some of the next possible few steps to take in order to report it. 

The Next Steps

  • Contact your insurer: Report your suspicions to your insurer through a number or email you’re certain of. Tell them of your concerns, whether it’s about any pay, identity theft, their insurance agents, or the security of your account. 
  • Contact your bank: Report these data breaches to your bank and tell them about a potential breach in your financial information. Your bank can then remain more vigilant about suspicious activity on your accounts. 
  • Change your passwords: After you report to the bank and insurer, you’ll be encouraged to update your account passwords for extra security. It may also be worth looking into getting stronger anti-virus software for your devices.

Life Insurance Fraud: Final Thoughts

While the insurance industry, like any other industry, encounters fraudsters and common scams alike, being able to report and spot them isn’t at difficult as it may seem. 

As long as you’re taking the time to discuss your needs with reputable and licensed insurance agents, and you’re clear about their official phone numbers and other ways to contact the company directly, you can plan ahead to prevent these issues.

In fact, with the right combination of life insurance policies and clear communication, you’ll be able to keep your information, money, and online accounts safe while still finding the best life insurance policy for your individual needs.