Top Five Life Insurance Scams
When it comes to money, people will do the strangest and most disturbing things.
Never is that more true than when it comes to life insurance.
As we come to the end of another year, there’s never been a better time than to
look back at some of the craziest—and most unique—ways people have tried to deceive
insurance companies, as well as some lessons that can be learned from them.
LESSON: Accidental death riders are available for most life insurance policies.
The chance of an accidental death in the US is much smaller than the chance of death
from natural causes.
- The police were huddled over a slain man; the victim shot in the head. There was
blood stained snow surrounding the victim on the jogging path in the park, where
earlier another jogger had discovered the body. Down a hill approximately 20 yards
from the body, the officers found a gun tied by rope to a sled. The sled had caught
onto a rock protruding from the snow. The slope continued downhill for another 100
yards into a wooded creek. It turns out; this death was a suicide staged as a robbery
and homicide. The deceased had bought a life insurance policy 6 months earlier.
Knowing that a suicide clause prevented payment of the death benefit for the first
two years of the policy, he staged a murder at the park. He emptied his wallet and
left it next to him, shot himself in the head and planned on the sled taking the
gun down the hill into the wooded creek. Once the detective put the facts together,
the claim was denied.
LESSON: Suicide clauses are standard
for all life insurance policies. Most deny payment for the first two years, although
some insurers offer policies with one year clauses.
- If you ever happen to meet nice old ladies who want to help you in exchange for
signing a life insurance policy, be very wary. Two elderly ladies apparently
provided shelter to a homeless man, in exchange for opening a $500,000 life insurance
policy. When he was run down shortly thereafter in an alley hit-and-run, police
became suspicious. However, it wasn’t until years later, when the police discovered
the two ladies had been involved in another similar incident, that the evidence
against them became insurmountable. http://www.cbsnews.com/stories/2006/05/24/national/main1649577.shtml
LESSON: Life insurance companies require an “insurable interest” for beneficiaries
of life insurance policies. The death of the insured is supposed to have a monetary
effect on the life of the beneficiaries. Close relatives (spouse, children, parents,
guardian of children) qualify. A business partner or a lender would qualify. Two
strangers would not. These ladies claimed to be related to their victims.
- An insurance agent called on a young couple who wanted a policy on each of them
and one on the baby. Making matters a little more difficult, they told the agent
that the baby was asleep and not to bother him. The agent insisted they wake up
the baby and bring him downstairs to see him. They told him the baby would not wake
up and called the equivalent of 911. Apparently, the baby had been dead for three
days and they were trying to write a policy on the dead baby! A very sad, but true
LESSON: Most child policies today are written as riders on the parent’s policies.
But a whole life or term policy is available for infants.
- Two men were tried for murder in Queens when a plot was unveiled to kill people
who unknowingly had insurance policies taken out on them by Richard James, a former
insurance agent. The plot was discovered when MetLife found that 21 policies had
been filed—all written by James—within a few years of each other, a rate that was
“318 percent higher than expected”.
LESSON: It is difficult to have a life insurance taken out on your life without
your knowledge. Insurers require a medical exam in most cases with a urine and blood
exam. So even if someone forged your signature, you still need to agree to an exam.
Smaller policies may be taken out, but the insurability issue still exists.
- A husband owned a life insurance policy for $150,000 with a $150,000 accidental
death rider. That means if the insured dies from an accident, the policy will pay
$300,000. The policy will only pay $150,000 if the death is from natural causes.
The husband dies suddenly from a heart attack in his house. The wife, knowing about
the rider, drags his dead body outside onto the driveway. She proceeds to run over
his body with her car. After the insurance inspector reviews examines the autopsy,
he realizes the insured died from a massive heart attack and suffered broken ribs
postmortem from the car running over his chest. The accidental death rider was denied.
The conclusion to be drawn from these sad and bizarre stories is that it doesn’t
pay to try to cheat or stretch the rules with life insurance policies. Invariably,
discrepancies will appear, and not only will you forfeit the original benefit of
the insurance—the money in the policy—but more than likely you will be spending
years in prison. It may seem like an easy way to get ahead, but will come back to
cost you in the end.
©2008, ReliaQuote Insurance Services, LLC