While life insurance can be a valuable financial tool, it is important to be aware of the potential for fraud it brings. Life insurance fraud occurs when someone misrepresents themselves in order to obtain a policy or benefits that they would not otherwise be entitled to. This can take many different forms, some of which are highlighted by William Schantz of mafllc below.
3 Common Types of Life Insurance Frauds
Policyowner Fraud
As per William Schantz, this type of fraud occurs when the policy owner provides false information on their life insurance application in order to obtain a policy with lower premiums or to get the coverage they would not otherwise be eligible for.
Beneficiary Fraud
Beneficiary occurs when the beneficiary of a life insurance policy misrepresents themselves in order to collect benefits they are not entitled to. This can happen if the beneficiary lies about their relationship with the insured, or if they forge the insured’s signature on documents in order to access the policy funds.
Claims Fraud
Claims fraud occurs when someone files a false or exaggerated life insurance claim in order to collect benefits they are not entitled to. This can happen if the claimant deliberately misrepresents the facts of the insured’s death or if they falsify documentation in order to support their claim.
How to Avoid Life Insurance Fraud
According to William Schantz, there are several steps you can take to avoid being a victim of life insurance fraud.
Review Life Insurance Policies Thoroughly
Carefully review any life insurance policy before signing it. Make sure that all of the information on the application is accurate and that you understand all of the terms and conditions of the policy. If you have any questions, be sure to ask them before you sign anything.
Always be Cautious of Policy Salesmen
Be wary of anyone who tries to sell you a life insurance policy without first getting to know you and your needs. A legitimate insurance agent will take the time to understand your unique financial situation before recommending a policy. Furthermore, anyone who pressures you into buying a life insurance policy or who tries to rush you through the application process should be steered clear of
Protecting Your Personal Information
Do not share your personal information with anyone unless you are absolutely sure that they are authorized to have it. This includes your social security number, date of birth, and bank account or credit card numbers.
If you are contacted by someone claiming to be from your life insurance company, do not give them any personal information unless you are absolutely certain that they are legitimate. If you have any doubts, hang up and call the customer service number on your policy to confirm their identity.
Unusual Life Insurance Policies
Be suspicious of anyone who offers to sell you a life insurance policy that pays out if you die of a specific cause, such as an accident or natural disaster. These policies are generally not available to the general public and are often used to perpetrate fraud.
STOLI
Be wary of anyone who asks you to take out a life insurance policy on someone else’s life without their knowledge or consent. This is known as stranger-originated life insurance (STOLI) and is often used to commit fraud.
The Bottom Line
Life insurance can be a valuable financial tool, but it is important to be aware of the potential for fraud. By taking the precautions suggested by William Schantz, you can help protect yourself from becoming a victim of life insurance fraud.