Life insurance fraud or fraud in general is the intentional deception that brings harm to someone which can be either physically or financially.

When it comes to life insurance fraud it’s something that is very specific. It’s referring to the act of intentional deception either by those selling or applying for a life insurance policy. The fraud is something that can manifest in different ways.

Fraud Examples

One example would be the purchasing or applying for a policy when there is already a policy that’s been issued; however, the most common type of insurance fraud is when someone makes deliberate misstatements either on the application or to the agent.

When it comes to the health of the person being insured the information that’s on the policy needs to be accurate, yes ladies, even age. Any person that has a medical condition or if you’re a smoke you need to be honest about it. You probably realize that if you tell the truth on your application that your premium is going to go up; however, if you lie you’re policy can be worthless.

When a contract, your life insurance policy, is issued due to fraudulent statements the insurance company can essentially void the contract and those that you purchased the insurance policy to help upon your death will get nothing.

The people that commit life insurance fraud can come up with some really elaborate schemes. There are actually cases where someone has faked their own death in order for their family to collect on the life insurance policy or created a false identity and faked their death. Unfortunately there are even cases where someone has murdered another person in order to collect on the life insurance. Not only is this person/people committing fraud now, but they are also committing first degree murder.

Company and Medical Fraud

One type of company fraud is when an employee’s company purchases a life insurance company on their employee without knowledge or consent. One of the best examples of this is what Wal-Mart was doing by purchasing life insurance policies on their low wage earning employees and cashing in on these policies when they died.

This isn’t something that’s illegal if the employee is aware of and grants permission for this to happen. If there is no consent it is fraud. There are a lot of legitimate reasons that a company would take out a life insurance policy on a high wage earner or a key man employee.

Even doctors can commit life insurance fraud when they certify the health of a person applying for an insurance policy even when they know they are ill. It can happen for someone that has a medical condition but is expected to live a really long time so the doctor omits the condition in order to allow the person to obtain insurance. They can also collude with a disreputable insurance agent to commit something called viatical fraud.

In the end the smart thing is just to be open and honest about everything. No matter how sly you are you’re eventually going to get caught.