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Life insurance is more than a purchase; it is an investment in protecting the financial future of your family in case the worst should happen to you. Most insurance companies and agents work tirelessly to provide you with the right policies that fit your budget.

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Beaware of Life Insurance Scams

Unfortunately, there are still a few unscrupulous agents who may take advantage of you and provide plans that benefit their pocketbook more than your needs.

What follows are a few of the more common life insurance scams so you can watch out for them in case they should occur to you.

Overstating Net Worth

This is where the insurance agent exaggerates your net worth on your life insurance application. The result is getting a bigger policy that you may not be able to afford. This is done for the commissions that agents make on selling policies that are larger, even if you cannot make payments on the premiums. You will need to check out your net worth as stated in the policy before you sign.

Never Pay the Agent Directly

Your agent should never get paid directly by you as they are likely to put the money in their pocket and leave you without the proper coverage. Any offer by the agent to pay them directly should be refused and you’ll want to report them to your state insurance department for possible disciplinary action.

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Annuities for Seniors

Annuities are part of many life insurance policies as they provide income after a pre-set period has passed so it can be enjoyed during your retirement. The pre-set time is often 10 to 15 years which makes them a sound investment if you are in your 40s or early 50s, but not worth it if you are already at retirement age.

When you consider the hefty fees imposed for removing the money early, it makes it a bad deal for seniors.


This scam involves the agent offering you a quote for the life insurance policy you requested and another, lower quote for the policy when it comes to another line of insurance, such as auto or home. Of course, you may not need the other policy and when combined it often adds up to more than what you are paying now.

So, while you may consider the offer, do not take it and instead focus only on the quote for the life insurance.

Life Insurance Owned by a Stranger

This is where a life insurance policy on you is owned by someone other than a spouse, parents, or other family members. It often occurs when a senior takes out a life insurance policy on themselves, then transfers the ownership to investors for cash.

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This practice is illegal in many states and not welcomed in the rest, so avoid this type of arrangement.

It’s important to know when to walk away, especially when you feel uncomfortable with some of the arrangements being made. Before you sign, read everything over and have a third party look at it if you have any questions.