Life insurance is a critical part of any family's financials. The amount of money that life insurance often deals with makes it a magnet for scams. Millions of Americans are targeted by these scams every year, and they can result in a person losing their entire life savings or their insurance policy. Be sure that you can spot these types of scams before they take advantage of you or someone that you know.
Stranger-Owned Life Insurance
One of the most common forms of life insurance scams is a stranger-owned life insurance policy. This legally dubious policy involves a salesman making an offer to buy a life insurance policy from a person by loaning them money upfront. In exchange for this loan, the senior agrees to sign over the proceeds from that life insurance policy. This scam can result in hundreds of thousands of dollars being turned over to an agent or broker instead of a family member. If the agent used fraudulent documents to facilitate the transaction, that could mean jail time for the agent involved.
Another problem comes from fake companies. Any scam artist can claim to be an insurance salesman. They could not even set up stranger policies and have no interest in selling insurance whatsoever. In these cases, the scam artist could simply take the initial check or the first few premium checks and scatter, or disappear after years of premium payments when the payer dies.
Watch Out for Fake Life Settlements
These problems with buying life insurance can extend to selling a life insurance policy as well. Selling life insurance involves a person's identity and thousands of dollars. While there are some reputable companies (just as with buying life insurance), unscrupulous businessmen can sell a life insurance policy in exchange for a poorly structured annuity. This annuity may not start paying the retiree money until ten or twenty years after the policy has been taken out, and there may be a provision in the annuity that reverts all of the funds back to the agent if a person dies before the annuity starts paying out. Structures can be established in life insurance scams where a person legally signs away all of their rights and possible claims to their own money.
Life insurance scams are rampant, but not unstoppable. People simply need to be vigilant. Research any life insurance companies that you are thinking of handing your money over to, and do not hesitate to call a financial advisor independent of the company you are considering. These prudent steps may mean the difference between success and financial ruin.
Make sure you choose an insurance agent that's experienced, credible, and trustworthy. We have experts to help you build a life insurance policy that works for you, reach out by filling out the short form here.