Life Insurance Scams: How to Protect Yourself

Buying life insurance coverage is all about protecting those you care about after you’re gone. What’s sad is that there are those who perpetrate life insurance scams, all in hopes of getting their hands on money that does not belong to them. Even worse, the most sophisticated life insurance fraud is often carried out by insurance agents. Here, we lay out some of the most common life insurance scams and discuss how to avoid becoming a victim.

What are the most common types of life insurance scams?

Scams are limited only by the imagination of the crook — and they are crooks. While not all scammers are insurance agents, insurance agent fraud is real. After all, these people have access to both your personal information and your money. The first step in protecting yourself is recognizing the most common types of life insurance scams.

Identity theft

When your identity is stolen, it can upend your life. One of the most common ways to attempt identity theft is to contact you by email, phone, or letter to request personal information. For example, a scammer may tell you all about a life insurance policy that sounds perfect for you. To “help you get started,” the scammer then asks for personal information, including your Social Security number. Once they have your name, Social Security number, and address, they’re well on their way to using your identity for their own illegal purposes or even selling your identity to another thief.

The fact that most scammers have a great deal of experience makes them dangerously smooth. It’s easy to believe what they’re saying. When someone posing as an agent asks for your banking information, credit card number, or mother’s maiden name, you may be tempted to give it to them.

Policy switching

Scammers get away

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5 Common Myths About Life Insurance Needs

Do you have enough life insurance to provide for your family if something were to happen to you? This is a question I recently received and unfortunately, many people have no idea. After all, death and pushy life insurance agents are two things most people would probably rather not deal with.

It’s an important question though. If you don’t have enough life insurance, you could leave your family in a difficult financial predicament. On the other hand, you could end up wasting thousands of dollars on something you don’t really need if you buy too much. When determining how much life insurance to buy, here are some common myths to steer clear of:

1. Everyone needs to have life insurance.

Life insurance has two main functions. The most common is to provide for people who are financially dependent on you like children and perhaps a spouse. The second is to pay estate taxes so that your heirs won’t have to sell property or a business to do so.

If you don’t have dependents or a federally taxable estate (currently over $12.06 million), you may not need life insurance. Keep in mind that insurance companies collect premiums, invest the money, and then pay their expenses and make a profit with the difference. This means that on average, most people would be better off skipping the insurance and investing the money on their own since the insurance companies pay out less than the total amount that they collect plus the investment returns. On the other hand, your family could be one of the few that really needs the insurance. Like all forms of insurance, the key is to have as much as you need but no more.

One final note

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