A Minnesota man was found dead in the Republic of Moldova, along with his passport and other identifying documents. His wife traveled to Moldova, confirmed his identity, and received a $2 million life insurance payout. 2 yrs later, their son found his father living abroad under an alias and enjoying his cut of the life span insurance proceeds.
In October 2011, Igor Vorotinov faked his death and split the life span insurance payout together with his wife, Irina. After an anonymous tip and years of investigation, the Federal Bureau of Investigation (FBI) finally trapped Vorotinov in 2018. He pleaded guilty and was sentenced to 41 months in prison. His wife and son had already pleaded guilty to participating in the scam. They were sentenced to 37 months in prison and 2 yrs of probation, respectively.
Not totally all life insurance scams have just as much drama. Some are as simple as being an unscrupulous agent pocketing your premium payments or someone lying on the life insurance application. But it’s a pricey problem. According to the FBI, the total cost of insurance fraud (not including health insurance) is significantly more than $40 billion per year. That costs the common family in the U.S. between $400 and $700 per year in increased insurance premiums.
Shady Agents and Impersonators
Nearly all life insurance agents have a standard goal: to market you a life insurance coverage that fits your needs. But a small number of bad actors prey upon unsuspecting customers.
Premium diversion
The scam: The FBI says the most frequent form of insurance fraud is a premium diversion, which will be the embezzlement of insurance premiums. Generally, the insurance agent collects your hard-earned money for insurance premiums but keeps it for themselves. The agent may go in terms of sending you fake documents to produce it appears to be everything is legitimate.
As an example, on Aug. 26, 2024, a Pensacola insurance agent pleaded guilty to wire fraud and money laundering charges linked to selling fraudulent insurance policies and collecting nearly $5 million in insurance premium payments.
How to prevent premium diversion:
- Contact your state department of insurance to be sure the agent is licensed.
- Get all the official documents associated with your coverage, like the policy, endorsements, and declarations.
- If you pay by check or money order, make certain it’s made out to the insurance company, not the average person’s agent or their business. Always look for a receipt.
Fee churning
The scam: A realtor convinces one to withdraw cash value or take the surrender value of your permanent life insurance coverage to buy more life insurance or switch life insurance policies. While the agent gets a commission, your coverage may not be better than your old coverage, and maybe it’s more expensive.
How to prevent fee churning: Don’t buy more life insurance or switch life insurance policies without fully understanding the costs, benefits, and restrictions.
Forgery
The scam: An insurance agent forges your signature to produce changes to your policy (such as naming themselves as the beneficiary) or takes out a policy without your knowledge to collect commissions.
As an example, on Jan. 25, 2024, a California insurance agent was sentenced to 150 days in jail through work release and ordered to cover $18,252 in restitution. Investigators unearthed that Saul Hinojosa wrote 15 fraudulent preneed burial insurance policies and 13 fraudulent life insurance policies. Hinojosa used his former insurance clients’ identities to take out policies without their knowledge. He collected about $18,000 in commissions.
How to prevent forgery scams: It’s difficult to know when something has been done without your knowledge. Work only with licensed insurance agents and review your policies on an annual basis to verify no changes have been made.
Other forms of life insurance agent scams
Ghost brokers: These are fraudsters who pose as insurance agents and sell fake insurance policies. They’ll often request cash or direct payments. Victims believe they have the best life insurance coverage, and nevertheless, the scam won’t arrive at the light until their beneficiaries try to file a claim. Ghost brokers might advertise cheap insurance on social media and other sites.
Bogus contacts: These scammers pose as insurance agents or representatives of your insurance company and will contact you by phone, text message, or email and say there is a problem with your life insurance policy. They could ask for the money, your Social Security number, and other information.
Beneficiary scam: A scammer contacts you and says you’re the beneficiary of a life insurance coverage from somebody who has recently passed away, but a superb premium balance is preventing them from issuing you a payment. The scammer will ask you to cover the balance. Scammers may scour obituaries to target new victims.
Dubious Applicants and Opportunistic Beneficiaries
Shady life insurance agents aren’t solely to blame for the price of life insurance fraud. Here are a few examples of scams perpetrated by life insurance applicants and bad actors trying to money in as beneficiaries.
Policy misrepresentation
The scam: One of the very most common life insurance scams is application fraud, also called policy misrepresentation. In this scam, the fraudster knowingly provides false information on the life span insurance application, such as for instance lying about their health history or concealing other facts. The goal is always to qualify for coverage or lower life insurance premiums.
Potential consequences for policy misrepresentation include:
- Application rejection
- Premium increase
- Claim denial
- Policy cancellation
- Criminal prosecution
- Faked deaths
The scam: Pseudocide is just a fake or staged death. Sometimes pseudocide is employed as a way to money in on a life insurance death payout. In some instances, such as for instance with Igor Vorotinov, a policyholder fakes their very own death so their beneficiary can collect. In other cases, someone might fake the death of an insured person.
As an example, on Sept. 1, 2024, a Georgia woman pleaded guilty to wire fraud for defrauding a life insurance settlement company after falsely claiming she was the recipient of a $250,000 life insurance death payout of a friend’s policy. The problem was that her friend was still alive.
Court documents show Brandi L. Browning contacted a life insurance settlement company and stated that she was the beneficiary of a pending life insurance claim. She offered to market her “right” to a $250,000 life insurance settlement for $217,500 and provided falsified documents to facilitate the scam. Browning faced 20 years in prison to be accompanied by four years of supervised release, a $250,000 fine, and mandatory restitution.
Murder for profit
The scam: This horrifying scam is what it really seems like Someone plots or commits murder for money on the victim’s life insurance policy. While this sort of life insurance scam isn’t prevalent, it will happen.
As an example, in October 2024, a Queens, New York, the man was faced with murder-for-hire and conspiracy to commit murder-for-hire concerning an alleged scheme to collect death advantages from the victim’s life insurance policy.
Per year ahead of the victim’s murder in 2017, Cory Martin and a co-conspirator fraudulently obtained life insurance coverage in the victim’s name. In addition, they made premium payments via money order and a bank card in the victim’s name. If convicted, Martin will face life imprisonment and probably the death penalty.
