By Tamara Nedjar, NICB Program Director for Life, Disability, Cargo, and CAT
You meet an agent who seems knowledgeable and trustworthy. You purchase a life insurance policy and begin paying premiums directly to the agent. Years later, when your family attempts to file a claim, they discover the policy never existed. The agent was not licensed; the insurer never received the premiums; and there is no policy to pay the claim.
This is one of the most common life insurance scams regulators see.
Unlike some types of financial fraud, life insurance fraud may not be discovered right away. Policies can remain in place for decades, making it particularly important for consumers to periodically review their coverage, beneficiaries and account information.
Life insurance fraud can take several forms, from fraudulent policies and unlicensed agents to unauthorized changes to an existing policy. The National Insurance Crime Bureau (NICB) identifies two common schemes consumers should be aware of and offers steps to help protect themselves and their beneficiaries.
How to Protect Yourself from a Fake Policy
- Verify the company. Confirm that it is a legitimate insurer authorized to sell life insurance in your state.
- Verify the agent. Check that the agent is currently licensed to sell insurance for that company, rather than relying on old or expired credentials. You can verify licensing through your state Department of Insurance using the NAIC directory.
- Pay the insurer, not the agent. Legitimate insurers rarely allow agents to collect premium payments directly.
- Check your online account. Confirm that your coverage, beneficiaries and payment history are accurately reflected in the insurer’s records.
What If Someone Changed Your Policy Information?
Another type of life insurance fraud involves account takeover. Someone who obtains access to your personal information may be able to make unauthorized changes to your policy, including changing the beneficiary. The individual could be a relative, caregiver, or someone posing as a trusted professional.
Account takeover disproportionately targets older adults who may rely on others to help manage their financial affairs.
How to Protect Yourself
- Check your account regularly. Review your beneficiary designations and contact information for unauthorized changes.
- Limit access. Be cautious about who can view or manage your policy, including caregivers and others who may assist with financial matters.
- Question requests for information. Treat requests for life insurance policy information with the same care you would requests involving a bank or other financial account.
- Review your policy annually. Confirm your coverage and beneficiaries with your agent or insurer each year.
- Contact your insurer directly if you notice an unauthorized change or suspect fraudulent activity.
Learn More
Get answers to frequently asked questions about life insurance fraud and learn more about scams to watch for through NICB’s consumer life insurance fraud resource.
Insurance industry organizations interested in learning more about partnering with NICB to combat life and disability insurance fraud can visit NICB’s life and disability insurance fraud resource.
Tamara Nedjar is Program Director for Life, Disability, Cargo, and CAT, with the National Insurance Crime Bureau.
