Many people don’t realize it, but life insurance fraud is a serious crime with potentially serious consequences. It’s surprisingly common, and it’s more difficult to get away with than you might think. It’s very important to know what the law is surrounding life insurance so that you don’t commit fraud unintentionally. Insurance agents can also commit fraud, and it’s important to be aware of it as a customer so that you can report them if it happens. Here are the most common types of life insurance fraud and the potential consequences that you need to watch out for.

Application Fraud

life insurance fraudApplication fraud is one of the most common types of insurance fraud. This is when you intentionally misrepresent yourself on your application to get a lower rate. Many people don’t realize that this is a crime, thinking of it as just small lies that won’t come back to hurt them. For example, smoking is one of the most common reasons people are denied life insurance or charged very high premiums. Because of this, many people will lie and say that they don’t smoke. However, insurance companies will review medical records and typically even require a medical examination, so they will find out that you do smoke – and this could get you into serious trouble. Other common instances of application fraud include lying about other health conditions or lying about income. Even if you don’t get into legal trouble for this, your insurance company will almost definitely raise your premiums through the roof as a consequence.


Forgery happens when someone other than the real policy owner makes a change to the policy by assuming their identity. Since policies today can usually be changed online or over the phone, it’s getting easier for people to commit this type of fraud. For example, a beneficiary might try to change the amount of the policy so that they receive more if the policyholder does pass away. This could also happen if someone wanted to be a beneficiary but was not initially listed on the policy. They would fraudulently access the policy and change it so that they would benefit. This often happens to people who are sick or vulnerable in some way.

Faked Deaths

It might sound like something out of a movie, but there have been cases where people have faked their death on paper in order to gain access to their own insurance money. These schemes are uncommon and very difficult to pull off, but they do happen, often as the result of years of careful conspiracy. In the most fascinating cases, criminals have even invented fake people and tried to cash in on their life insurance – even though it didn’t exist in the first place.

Premeditated Murder

Another very dramatic form of insurance fraud is murder by a beneficiary for the purpose of cashing in on an insurance policy. Again, this is not common, but it does happen, and the perpetrators are usually caught very quickly. Many people dramatically underestimate how difficult it is to actually kill someone, let alone make it look unintentional. However, many people are so blinded by the promise of a huge insurance payout that they don’t thoroughly consider the consequences.

Pocketing Premiums

It’s not only consumers that commit insurance fraud – insurance agents do it too. There are many different ways that insurance agents commit fraud, and it’s very important to keep an eye out for them. While there are plenty of excellent insurance agents out there, there are also many that are just out to make money and don’t care about your well-being. One of the most common ways that insurance agents will commit fraud is by asking you to send them the premiums directly, either in a check or online payment. Instead of putting it towards your insurance policy, they will just take it for themselves, and then you’ll be without insurance. If you’re ever asked by an insurance agent to send a payment directly to them, you should contact your insurance company right away.

You can also avoid this situation by checking to make sure your insurance agent is licensed before you start working with them. Many phony insurance agents will use a large brand name on their marketing to have you believe that they are a legitimate agent. These agents often like to do a lot of their communications online and will ask for bank information or other personal details unnecessarily. It’s much easier to check the legitimacy of your insurance agent than you might think. You can go on your state’s insurance licensing site and look them up, or you can ask them for their license number.


Many insurance agents will try to upsell you to a policy that you don’t actually need. They’ll scare you into thinking that you really need the extra protection for you and your family when really they just want to make more money in commissions. Many agents don’t realize that this is actually considered insurance fraud. As a customer, this is something you should always watch out for, and stand your ground if an agent starts trying to upsell you.

How to Avoid Insurance Fraud

There are steps that you can take to avoid getting wrapped up in insurance fraud. Not only could you be a target for fraudulent insurance agents, but you also could end up being a target for other people looking to take advance of honest policyholders. As mentioned previously, you should always be diligent about checking the legitimacy of your insurance agent’s license. It’s also important to thoroughly read any policy before signing it, and be sure to ask questions and get detailed answers if there are any concerns.

It’s also important to always have a copy of your insurance policy, just in case. Do not ever hand over your insurance policy to anyone else blindly. There might be situations where a beneficiary needs a copy of the policy, but you should always investigate why and make sure the inquiry is legitimate before providing it. Finally, do not ever sign a policy that has blanks on it that someone else could fill in later. Many fraudulent agents will tell you that you don’t need to fill in these spaces, only to fill them in themselves to get a payout.

What are the consequences of insurance fraud?

Insurance fraud often results in both state and federal prosecution. In the worst cases, you could end up serving a very lengthy prison sentence. However, even if you don’t end up going to prison, you could still end up owing a significant amount in financial restitution to those affected by the insurance fraud. If you’re a licensed professional, you could also be stripped of your licensing. The consequences typically depend on the severity and particulars of the case.

Even if you aren’t prosecuted, you’ll still be stuck with serious consequences if you commit any sort of insurance fraud and get caught, no matter how small. In many cases, you’ll just be denied insurance coverage for the rest of your life, which means you and your loved ones will be unprotected in the event of an accident. This could lead to serious financial challenges. If for some reason you are still able to qualify for insurance, your premiums will likely go way up, as companies will now consider you a risk to insure.


  1. My husband said I’m dead and I’m not. What should I do?

    1. Andrew @ LifeAnt

      Hi Judy,
      Considering that your husband would need to provide at least a death certificate in order to collect the benefit money, he will have a difficult time doing that since you’re still alive. I think the first thing you should do is contact the life insurance company and notify them that you’re still alive and that your husband tried to file an inaccurate claim. The second thing you should do is notify your state’s department of insurance and tell them about the situation so that they have this on file.

  2. I believe that my wife has taken out a life insurance policy on me without my consent . I would like to know what I need to do in order to find out this information. I would appreciate any and all help that you may give .

  3. Myrtice Boone Moreland

    I went to take out life insurance on my husband and I. The company sent information to my husband for consent and he was angry that I did it so I immediately cancelled it. He is now, a year later, attempting to prosecute the insurance agent. Should I be concerned?

    1. Andrew @ LifeAnt

      Hi Myrtice,
      I don’t think you need to be concerned because there was no fraudulent activity. All you did was apply for a policy for both of you, which you’re allowed to do. Once he was notified, he said that he didn’t approve of the policy. He can be mad about it, but you didn’t do anything wrong nor did the insurance agent, so there is nothing for you to be worried about, other than you might receive some empty threats from your husband.

  4. My senior mother at age 76, purchased a $5000 whole life insurance policy in 2000. After 20 years of paying her premium (auto-pay), she has paid a total of $15,957 in premiums for a $5000 policy. Is this legal? In 2005, 2007, and 2009 she was sold additional policies with the same company and agent, also overpaying the value of each policy threefold. My mother is currently 96. Have any laws been broken? No one in the family even knows who the signing insurance agent is, or recalls when the first policy was written. The current agent, took over the accounts in 2016. I feel like my mother should have been notified to cash out her policy before paying 3 X the value. This is a recent discovery we’re reporting to the attorney general.

    1. It probably isn’t illegal, though it is unfortunate. Has she received dividend payments?

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