Life Insurance Scams: Targeting The Elderly And How To Stop Them

Life insurance fraud is a significant issue that impacts everyone by driving up premiums and creating financial risks. Older citizens are often targeted by life insurance fraudsters, as they are perceived to be more trusting and less likely to report fraud. This type of fraud can take many forms, from providing false information on a life insurance application to manipulating another person's policy or even faking a death to claim benefits. For example, in a case from Baton Rouge, Louisiana, a life insurance agent, Timothy R. Schlatre, falsified applicants' financial details to secure life insurance policies with inflated values, raking in commissions that he wasn't entitled to. To prevent life insurance fraud, it is important to be cautious of unsolicited offers and cold calls, offers that sound too good to be true, and high-pressure sales tactics demanding instant decisions and payments. It is also crucial to research the reputation and ratings of the life insurance agent or company and to confirm their credentials and regulatory compliance. By being vigilant and informed, individuals can protect themselves from falling victim to life insurance fraud.

Identity theft

Instances of elder fraud and identity theft have increased rapidly over the years. Seniors are often targeted because they are perceived to have a high net worth, and they are considered more trusting and polite than other age groups, making it difficult for them to say "no" to unsolicited requests. Additionally, older adults may be less technologically savvy than the criminals attempting to steal their information, making them easy targets for phishing and other online scams.

• Medical identity theft occurs when someone's personally identifiable information (PII) is stolen and used to bill them for medical services or treatments they did not receive.
• Estate identity theft happens after a senior has passed away, and someone fraudulently collects their Social Security checks or other benefits.
• Tax fraud involves stealing an older adult's identity to steal their tax refund.
• Phone scams are very common and can take various forms. Scammers may pose as family members or acquaintances, or they may claim that the senior has won a prize or is eligible for a special offer. The goal is to collect PII to facilitate financial fraud and theft.
• Military identity theft involves stealing a veteran's PII to collect their military benefits.
• Social Security identity theft occurs when criminals use someone's Social Security number to avoid paying taxes or commit other types of fraud, such as financial, government, criminal, medical, or utility identity theft.
• Credit card fraud is a common type of identity theft where the perpetrator uses the senior's credit or debit card for financial gain.
• Wire transfer fraud involves scammers gaining access to the senior's banking information to siphon funds from their accounts or convincing them to transfer money through deceptive means.

To protect themselves from identity theft, seniors can consider purchasing identity theft protection software and being cautious when sharing personal information online or over the phone. It is also important to regularly review financial statements and stay informed about the latest scams and strategies used by hackers.

Fraudulent beneficiary changes

Life insurance fraud can occur when an insured, policyholder, or beneficiary is deceitful or falsifies information to benefit from a life insurance policy. One common type of life insurance fraud is forgery of ownership, where someone other than the policyholder changes the ownership or beneficiaries of a policy. In this case, only the policyholder, either individually or as a representative through a power of attorney, can legally make changes to a policy. Another type of fraud is application fraud, where an individual knowingly provides false information or misrepresents themselves or their health history on their life insurance application. This can include concealing material facts or lying about their health status.

In the context of elderly individuals, there have been cases where insurance agents have targeted and recruited elderly clients of modest means to serve as straw buyers and apply for universal life insurance policies. These agents misrepresent key elements of the application, such as stating that the straw buyers are worth millions when they have a much lower net worth. They also shift money around to make it appear as though the buyers are paying the premiums themselves, when in fact, the money is coming from third-party investors. The agents then profit from the commissions generated by these policies and the ability to resell them on the secondary market.

Additionally, there are instances where changing the beneficiaries of a life insurance policy can raise concerns, particularly when the insured individual is elderly or lacks mental capacity. If a change in beneficiaries occurs shortly before the insured person's demise, there may be concerns of undue influence or manipulation by a caregiver or estranged family member. In such cases, former beneficiaries may have grounds to contest claims made by the new beneficiaries and assert their claim to the death benefits.

To protect themselves from fraudulent beneficiary changes, insured individuals and beneficiaries should familiarize themselves with the requirements outlined in the life insurance policy regarding beneficiary changes. They should also be aware that changes made while the insured person lacked mental capacity or free will may be deemed invalid. Former beneficiaries should also be vigilant for warning signs that indicate a change in beneficiaries may be fraudulent.

Fraudulent beneficiary additions

The addition of beneficiaries at the eleventh hour can raise concerns for life insurance companies. Typically, the insured individual retains the freedom to modify beneficiaries as long as these modifications comply with any stipulations specified in the life insurance policy. However, if the insured person is elderly, gravely ill, or lacks mental capacity, and the change in beneficiaries occurs shortly before their death, there is a possibility that undue influence has been exerted upon them.

In certain circumstances, last-minute alterations to beneficiaries may give former beneficiaries grounds to contest claims made by current beneficiaries. For example, if the insured person was in a vulnerable state and lacked the mental capacity to exercise their free will, the change in beneficiaries will likely be deemed invalid.

To protect yourself from fraudulent beneficiary addition scams, it is important to be prudent with your personal information. Never share sensitive information, such as your Social Security number or bank details, on an unsolicited call. Be cautious about posting personal information on social media, as scammers can use this information to learn more about you and tailor their scam accordingly. It is also recommended to resist responding to unsolicited communications and to only share payment information over the phone with licensed insurance agents or brokers.

Elder financial abuse

One common type of scam is government impersonation, where scammers pretend to be from a government agency like the IRS, Social Security Administration, or Medicare. They threaten arrest or deportation unless the person pays up immediately. Another scam involves sweepstakes and lotteries, where older adults are told they have won a prize but must first send money to cover taxes and processing fees. Romance scams are also prevalent, with scammers creating fake profiles on social media to exploit the loneliness of older adults and trick them into sending money.

Life insurance fraud is a significant problem within the broader issue of elder financial abuse. Unscrupulous life insurance agents may pocket premium payments or forge signatures on policies to make themselves the beneficiary. Additionally, elderly individuals may be targeted with fraudulent investment opportunities or fake life insurance policies, resulting in substantial financial losses.

To protect themselves from elder financial abuse, older adults should be cautious of unsolicited offers, cold calls, and high-pressure sales tactics. They should also be wary of offers that sound too good to be true and always verify the credentials of anyone offering financial products or services. Seeking guidance from a trusted financial advisor can also help older adults avoid falling victim to scams.

Phishing

Fake Policy Issues

Fraudsters may send emails or text messages posing as the victim's insurance company, claiming there is an issue with their existing policy. For example, they may state that the last premium payment did not go through or that the policy has been cancelled. The email will then prompt the victim to provide sensitive personal information, such as their Social Security number or credit card details, to resolve the issue.

Surprise Beneficiary Claims

In this scam, the victim receives an email or text message claiming they are the beneficiary of someone else's policy. For example, the message may state that someone who has passed away named them as a beneficiary or that someone purchased a policy on their behalf. The scammers then request personal information from the victim, often with a sense of urgency to prevent the victim from verifying the details.

Fake Insurance Websites

Scammers create fake websites that mimic legitimate insurance company websites. These fake websites often advertise extremely low rates or simplified sign-up processes. When victims attempt to sign up, they are prompted to enter their credit card or bank account information, which is then stolen by the scammers.

Dishonest Online Quotes

Some scam websites offer instant quotes in exchange for the victim's contact information. However, instead of providing a quote, these websites sell the victim's information to multiple insurance agents, resulting in unwanted contacts and potential fraud.

To protect oneself from such phishing attacks, it is important to never click on suspicious links or attachments in unsolicited emails or text messages. Always verify the legitimacy of the sender by contacting the insurance company directly using the contact information provided on their official website or documentation. Be cautious of requests for sensitive personal information, and always review communications carefully for signs of phishing, such as misspellings or unusual email addresses.

Frequently asked questions