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How to Avoid life Insurance Fraud

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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. Two years later, their son found his father living abroad under an alias and enjoying his cut of the life insurance proceeds.

That might sound like a pitch for a Hollywood script, but it really happened.

In October 2011, Igor Vorotinov faked his death and split the life insurance payout with his wife, Irina. After an anonymous tip and years of investigation, the Federal Bureau of Investigation (FBI) finally caught up with Vorotinov in 2018. He pleaded guilty and was sentenced to 41 months in prison. His wife and son had already pleaded guilty for their participation in the scam. They were sentenced to 37 months in prison and two years of probation, respectively.

Not all life insurance scams have as much drama. Some are as simple as an unscrupulous agent pocketing your premium payments or someone lying on their life insurance application. But it is an expensive problem. The total cost of insurance fraud (not including health insurance) is more than $40 billion per year, according to the FBI. That costs the average family in the U.S. between $400 and $700 per year in increased insurance premiums.

Here are some life insurance scams you should know about.

Shady Agents and Impersonators

Almost all life insurance agents have a common goal: to sell you a life insurance policy that fits your specific needs. But there are a handful of bad actors who prey upon unsuspecting customers.

Premium diversion

The scam: The FBI says the most common form of insurance fraud is premium diversion, which is the embezzlement of insurance premiums. Generally, the insurance agent collects your money for insurance premiums but keeps it for themselves. The agent may go as far as sending you fake documents to make it look like everything is legitimate.

For example, on Aug. 26, 2021, a Pensacola insurance agent pleaded guilty to wire fraud and money laundering charges related to selling fraudulent insurance policies and collecting nearly $5 million in insurance premium payments.

How to avoid premium diversion:

  • Contact your state department of insurance to make sure the agent is licensed.
  • Get all of the official documents associated with your coverage, including the policy, endorsements and declarations.
  • If you pay by check or money order, make sure it’s made out to the insurance company, not the individual agent or their business. Always ask for a receipt.

Related: What happens if an insurance agent steal your premium payments?

Fee churning

The scam: An agent convinces you to withdraw cash value or take the surrender value of your permanent life insurance policy to buy more life insurance or switch life insurance policies. While the agent gets a commission, your new coverage may not be better than your old coverage, and it could be more expensive.

How to avoid fee churning: Don’t buy more life insurance or switch life insurance policies without fully understanding the costs, benefits and restrictions.


The scam: An insurance agent forges your signature to make changes to your policy (such as naming themselves as the beneficiary) or takes out a policy without your knowledge to collect commissions.

For example, on Jan. 25, 2022, a California insurance agent was sentenced to 150 days in jail through work release and ordered to pay $18,252 in restitution. Investigators found 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 avoid 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 confirm no changes have been made.

Other types of life insurance agent scams

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  • 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 a legitimate life insurance policy, but the scam won’t come to light until their beneficiaries try to file a claim. Ghost brokers might advertise cheap insurance on social media or 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’s a problem with your life insurance policy. They may ask for money, your Social Security number and other information.
  • Beneficiary scam: A scammer contacts you and says you’re the beneficiary of a life insurance policy from someone who has recently passed away, but an outstanding premium balance is preventing them from issuing you a payment. The scammer will ask you to pay 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 cost of life insurance fraud. Here are some examples of scams perpetrated by life insurance applicants and bad actors looking to cash in as beneficiaries.

Policy misrepresentation

The scam: One of the most common life insurance scams is application fraud, also called policy misrepresentation. In this scam, the fraudster knowingly provides false information on the life insurance application, such as lying about their health history or concealing other facts. The goal is 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

Related: How life insurance companies get intel on you:

Faked deaths

The scam: Pseudocide is a fake or staged death. Sometimes pseudocide is used as a means to cash in on a life insurance death payout. In some cases, such as with Igor Vorotinov, a policyholder fakes their own death so their beneficiary can collect. In other cases, someone might fake the death of an insured person.

For example, on Sept. 1, 2021, 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. Problem was, 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 sell 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 followed by three years of supervised release, a $250,000 fine and mandatory restitution.

Murder for profit

The scam: This horrifying scam is exactly what it sounds like: Someone plots or commits a murder to cash in on the victim’s life insurance policy. While this type of life insurance scam isn’t prevalent, it does happen.

For example, in October 2021, a Queens, New York man was charged with murder-for-hire and conspiracy to commit murder-for-hire relating to an alleged scheme to collect death benefits from the victim’s life insurance policy.

A year prior to the victim’s murder in 2017, Cory Martin and a co-conspirator fraudulently obtained a life insurance policy in the victim’s name. They also made premium payments via money order and a debit card in the victim’s name. If convicted, Martin will face life imprisonment and possibly the death penalty.

How to Report Life Insurance Fraud

Here are some ways to report life insurance fraud:

  • Fraud bureaus. Most states have a fraud bureau that investigates insurance fraud. Here’s how to contact your state’s department of insurance.
  • Insurance companies. Contact your insurance company directly if you believe you’re being defrauded.
  • National Insurance Crime Bureau (NICB). The NICB is a non-profit organization that partners with insurance companies and law enforcement. You can report fraud online or by calling 800-TEL-NICB (800-835-6422).
  • National Association of Insurance Commissioners (NAIC). You can file a complaint on the NAIC’s online fraud reporting system.

What is life Insurance? Main types of life Insurance

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