Life insurance fraud can leave your loved ones unprotected and your personal data at risk. Here's what you need to know about fraud targeting life insurance policies and how to avoid it.

Types of Life Insurance Fraud

To start, it's important to have a full understanding of the types of fraud and risks associated with life insurance, including the following:

• Premium Diversion. The most common type of insurance fraud is premium diversion. It happens when an unscrupulous insurance agent collects life insurance premium payments and keeps the money instead of sending it to the underwriter.
• Fee Churning. In fee churning, insurance agents conspire to take multiple commissions through a series of reinsurance agreements. Each commission payment reduces the customer's initial premium until there's no money left to pay claims.
• Forgery. Another type of life insurance fraud a bad agent may commit is forgery. For example, they may fake your signature to gain access to your account so they can change your beneficiary or obtain personal information linked to the account.
• Policy Switching. In policy switching, a deceptive agent converts your policy to one with less coverage. You may be told — or allowed to believe — that your premium payment will decrease while your coverage stays the same.
• Fraudulent Insurance Companies. Companies that are either not legitimate insurance providers or not licensed by the state where they are selling policies are another source of fraud. Fake insurance companies may offer extremely low premiums and then collect payments with no intention or ability to pay claims, notes the National Association of Insurance Commissioners (NAIC).
• Deceptive Applications. A person buying life insurance can commit fraud by deliberately submitting false information on an application form. This includes both putting in wrong information and omitting important information, like parts of their medical history.
• Faked Deaths. Faking a death to allow someone to collect life insurance payout — on behalf of the policyholder or someone else — is rare, despite how often that fraud story is depicted in film and TV, but it is still a possibility.
• Insurance Rep Impersonations. Identity thieves pretending to represent life insurance companies may contact policyholders saying there's a problem with the policy and asking for personal information or payment to correct it. In another version of this scheme, the scammers claim their target is the beneficiary of a life insurance policy but needs to make an outstanding premium payment to get the check.

5 Tips to Protect Yourself

If you're worried about fraud, you can follow these easy tips to stay alert and recognize potential warning signs of fraud activity.

1. Verify the Insurance Company Is Legitimate

Before you buy life insurance, remember this NAIC slogan: Stop. Call. Confirm.

Don't sign an application form or make a premium payment until you verify that the insurance company you are dealing with is legitimate. You can call your state insurance department to confirm whether the company exists and is licensed to sell insurance in that state.

2. Know the Warning Signs of Fraud

Some clear warning signs of fraud include:

• High-pressure sales tactics, like telling you to purchase a policy right away before the price goes up.

• A request that you write premium checks to the agent's name or send them to a P.O. Box.

• Requests to pay premiums via wire transfer, gift card, prepaid card or money order.

• An offer to sell a policy with a premium that's more than 15-20% lower than one from another insurance company with similar coverage.

• Failure to receive a copy of your policy.

3. Understand Your Policy

Before you buy a life insurance policy, review a written document that lays out the details of its terms. Ask the insurance agent any questions you have about your coverage, and be wary if they seem unwilling or unable to explain it.

4. Protect Your Personal Information

If you receive an unsolicited call from someone claiming to be from your life insurance company, don't share any personal or financial information. If you think the caller might be legitimate, contact the insurance company yourself to verify. Reputable life insurance providers don't generally make these kinds of unprompted calls seeking information.

5. Learn How To Report Fraud

If you suspect you've been a target or victim of life insurance fraud, you can report the incident through the NAIC's uniform fraud reporting system, which will automatically send your report to your state's insurance department.

Be on your guard against life insurance fraud so you and your loved ones stay protected.