Life Insurance Scams

Ok, we’ve all heard about Life insurance scams. It’s the white elephant in the room when I tell people I’m a life insurance agent. Everyone has a story about the life insurance person who sold them a product they didn’t need or steered someone they know toward a purchase that was far too expensive for their budget. Ever heard of the whole life insurance scam?

There are even stories about agents bilking elderly people – ugh. 

On the other hand, you hear about policyholders who try and game the system. Lying on their applications hoping to save money by pulling the wool over the life insurance company’s eyes. Are these simply myths that circulate or is there something more sinister to be said about the “shady” side of the life insurance industry? 

Find out more now! 

Why I Care

But before I launch into this very touchy subject I want to introduce myself. My name is James Heidebrecht and I’m the founder of Policy Architects. We’re a boutique life insurance agency with a view to providing excellent customer service to each and every client that contacts our office. Unlike a call center, we don’t have quotas or scripted questions and answers. When you meet with us we give you the best advice available to ensure you buy a policy that suits your unique needs. 

I’m here to tell you that all life insurance companies are NOT created equally. They all approach medical and personal circumstances differently. This is why it’s imperative that you shop around. Why not leave the legwork to the experts? We’ll save you time, money and hassle. Not to mention the fact that you’re a client for life. 

You can also rest peacefully knowing we will always give the best advice available for your particular needs. We are motivated by customer satisfaction – NOT increasing our commissions at your expense. 

So let’s get down to business! 

Life Insurance Scams: Let's Take a Look at the Agents 

Rumors and horror stories about life insurance scams abound. Sadly this industry has a bit of a reputation for taking advantage of unsuspecting customers. I think there are a number of reasons for this which I’ll discuss below. Hopefully, this allays any concerns you have about this very necessary industry. 

Don’t get me wrong, there are of course some seriously rotten apples in the bunch – but you shouldn’t let that spoil the bushel. More often than not your life insurance agent is on the up and up. 

…but there are some things you should be on the lookout for when you select the person that creates your coverage. 

So let’s dig in and explore common issues that come up when you purchase life insurance. 

5 Tips: How to Avoid Dealing with an Agent Who May Not Get You the Best Policy


Tied or Captive Agents 

Is life Insurance worth it

Now, this is has nothing to do with life insurance scams but it could leave you with a sour taste if you aren’t familiar with the life insurance process. There’s a big difference between a tied agent and an independent agent. I’m an independent agent which means I have access to coverage from the best life insurance companies in Canada. When I speak to you, I perform a needs analysis, review your medical and financial history and then sift through all the potential insurers to pinpoint the company that will give you the best deal. 

A tied or captive agent works for ONE life insurance company and sells their products exclusively. So when you call, they direct you to the best product they have for your situation. Which is great – unless their products don’t suit you…and that’s often the case. 

The key to obtaining the best possible rate is shopping around and that is EXACTLY what an independent life insurance agent does for you.  

The thing is most consumers are not well versed in the life insurance industry and don’t know all the ins and outs. Why should they? That’s our job. Unfortunately, this all comes to a head when you make a purchase based solely on name recognition. 

Let’s Check Out Some Numbers 

For example, let’s say a 42-year-old female buys a life insurance policy through her friend who’s recently signed up to sell insurance and investments with Primerica Canada. She needs life insurance and wants to support her friend so she purchases $500k of term coverage for 30 years at a cost of $126.83 per month.  Sound like a good deal? Maybe, had she come to me, I could have found her identical coverage with Equitable Life at $90.03 per month.  That’s a savings of $36.80 monthly or $441.60 annually!

Her total savings over 30 years? $13,248! 

THAT’S A LOT OF MONEY.  Not to mention, the Equitable Life coverage comes with a permanent conversion option which Primerica doesn’t have. Very important in the unlikely event you become uninsurable. As I mention in many of my articles, not all life insurance companies are created equal. 

So if you go with a tied agent and find out you paid this much more I’m sure you think life insurance is a scam. The thing it’s not. You just have to be aware that there are a lot of different insurers and they all have different niches. For this healthy 40 something client, Primerica is NOT the insurer for her.  

The moral of the story always work with a knowledgeable independent life insurance agent. We save you serious time, money & hassle. 


Too Many Agents Rely On Friends & Family 

Life Insurance Frauds Cases

Don’t get me wrong, I definitely help friends and family that ask for assistance. There is absolutely NOTHING wrong with this. However, there’s a line. I’m sure you’re familiar with people who rely on loved ones as their main sales pipeline. You know who they are. The Facebook and Instagram spammers that show up at dinner with scary life insurance stories. 

Sadly, this gives life insurance a bad name. High-pressure sales tactics don’t work and in fact, drive people away.  

In my experience letting people come to me really helps. Sure my friends and family know what I do, but I concentrate my efforts on people who are actually in the life insurance market. 


Commission Breath - Whole Life Insurance Scam  

Life Insurance Scams Commissions

Yep, it happens. There are predatory life insurance agents that direct you to products that cost a bomb because they are rewarded with high commissions. I’d like to think that most agents do NOT do this and always select the products that best meet the needs of their clients, but that’s not always the case. 

This is particularly true when it comes to permanent life insurance products like whole life insurance. Whole life insurance is a very good tool and a big part of the life insurance arsenal. But it isn’t for everyone. In my personal experience term life insurance works for most people most of the time. 

90% of the clients who come to see me are looking for income replacement should they die prematurely. The need is temporary. Term life insurance fulfills this goal and is super affordable. Especially if you buy it when you’re young and healthy.  So for someone in their 30’s that’s watching their pennies and looking to attain this goal, term is the way to go. I would rarely push them toward a permanent policy UNLESS they want coverage for life and even then there are options to discuss. 

Whole life is for people who have an estate, business interests to protect or need to create a tax shelter for excess income. In a nutshell, it works well for those who have expendable funds and want coverage until the day they die or are looking to accumulate funds…

..but there is an exception – final expense policies. These policies rock for those who want to cover their funeral and the premiums are very affordable. 

So why would an agent push their client toward a whole life policy if they don’t need it? Commissions. They pay out a lot more money so there is a financial incentive. 

That’s why it’s very important to choose your independent agent wisely. You want someone who is motivated by a sense of ethics not just their bottom line. 


Pushing More Than You Need! 

Life Insurance Scams How to Avoid Them

This does happen. Some agents push you to buy more coverage than you need. Hey, it’s easier for them not to have to explore all the money saving options out there. If your independent agent doesn’t do a thorough needs analysis or speak to you about ways you can save some cash, get a second opinion. 

There are many different tactics, like layering coverage, that will save you a bomb in the long run. A good agent will know all about this and help you find the most affordable policy with the most comprehensive coverage. 

Oh and buyer beware that doesn’t mean you should cheap out. Being underinsured isn’t an option either. 

Remember, if you have a great life insurance agent, you’re a client for life. As your life circumstances change so do your life insurance needs. This means updating your coverage when you need to.


Inexperience or Burn Out 

Life Insurance Scams Protect Yourself

Yep, it happens. There are predatory life insurance agents that direct you to products that cost a bomb because they are rewarded with high commissions. I’d like to think that most agents do NOT do this and always select the products that best meet the needs of their clients, but that’s not always the case. 

This is particularly true when it comes to permanent life insurance products like whole life insurance. Whole life insurance is a very good tool and a big part of the life insurance arsenal. But it isn’t for everyone. In my personal experience term life insurance works for most people most of the time. 

Your agent should love what they do and have a solid network to consult if they don’t know the answers. Life insurance is a very complicated business. It’s important to find a knowledgable agent that enjoys the planning side of this business. Sure anyone can sell you a life insurance policy, but it’s way more involved than that. 

A fantastic agent will go through not only your CURRENT personal circumstances, but they will review your goals. Remember this is a long term commitment. This means you want to avoid agents who have little to no experience and don’t have a network to consult when they need input. At Policy Architects we have a number of specialists we speak to if your issue falls outside of our wheelhouse. Knowing when to get help is just part of the business. 

You should also avoid agents who think they know it all and aren’t willing to think outside of the box. Some oldtimers have a hard time with change and being flexible. Find someone who is always learning about cutting edge ways to save you a few dollars. 

Lastly, a great life insurance agent will take the energy and time to really listen to you and find out what your needs and concerns are. They will also explain things with language that’s easy to understand. If you find yourself with an advisor who’s using a lot of jargon, don’t walk, RUN the other way!

Life Insurance Scams: Let's Check Out Some Clients

Life insurance scams aren’t only instigated by agents. Policyholders also occasionally try to pull a fast one. Stretching the truth to get better rates is one of the main ways people do this. A little white lie is considered fraud in the life insurance industry…

…and fraud is a criminal offense. 

Insurers have to insulate themselves from this sort of behavior or they would go out of business. So if you’re tempted to withhold information or outright lie on your application to get a better rating DON’T do it! If the life insurance company even gets a whiff that you have been less than 100% transparent they will simply deny your beneficiary’s claim. 

Two Year Contestability Period 

After you purchase your life insurance policy there is a 2 year contestability period that goes into effect. This means if you pass away during this period the insurer can and will likely investigate the claim. If you misrepresented any medical issues you have and they’re revealed, the life insurance company will NOT pay out the claim. 

….OK well, two years have passed and I’m in the clear! No, you’re not. There is no expiry date for life insurance fraud investigations. Whatever you do, do not be tempted to lie on your life insurance application. The potential savings is simply not worth it and you won’t fool the insurers. They’re great at figuring things out. This is their job after all. 

A Good Example of Why You Should ALWAYS Tell The Truth

A top Ontario court has ruled that a woman cannot claim a $97,500 life insurance policy because the application by her late partner contained inaccurate information about his health.

This decision by the Ontario Superior Court again highlights the importance of correctly answering health-related questions on insurance applications. You may think you are protected once a policy is issued, but that is not the case. This is because the insurance company might only check the details when you make a claim.

One couple’s $97,500 life insurance mistake



The crazy thing is, the gentleman died of a brain tumor which was unrelated to the battery of questions he answered inaccurately. This means that even if you the fib you tell is unrelated to your cause of death, the benefits will be denied if you don’t give the insurer all the information they need to accurately rate you. 

Life Insurance Scams: The Insurance Companies

Another question people have is whether or not life insurance companies pay out. Yes, they do. This is a highly regulated industry thankfully, which means there is little room for life insurance companies to dodge their responsibilities. While insurers do investigate claims they feel are fraudulent and on occasion push that envelope – for the most part, claims are honored without a hitch. 

In 2017, the total number of Canadians holding insurance grew to almost 29 million, and the industry paid $92 billion in claims (or $1.8 billion a week) up 4.3% from 2016


If you’re concerned that your insurer will go out of business and your protection will go out the window, fear not. Canadian policyholders are protected by Assuris. This is a not for profit that operates independently to protect policyholders from exactly this. You can click on for more information. 

Beneficiaries & How This Can Go Wrong

Although life insurance companies DO pay out their claims there’s one small hitch your family can run into. Make sure you keep your beneficiary information up to date. If your beneficiary dies or can’t be located the benefits will be subject to probate…

Make sure all addresses and contact information are up to date because the life insurance company doesn’t have to do a whole lot to track your beneficiary down. Which means the benefits may go unclaimed…indefinitely. 


Check List to Avoid Life Insurance Scams

Always Use an Independent Life Insurance Agent 

At Policy Architects we have access to the top insurance companies in Canada. This means we find the most comprehensive coverage at affordable rates. Remember not all life insurance companies are created equal. Some are more lenient than others for medical and lifestyle issues and the savings can be in the 10’s of thousands of dollars. 

Use An Experienced Agent & Someone Who Has Additional Resources  

There’s a lot to be said for experience. That being said, life insurance is a VERY complicated industry and NO ONE out there knows everything. We all have niches that we excel in. I happen to have a very good network of experts that I access when I don’t have the answers. Any agent worth their salt will have the same. If your agent is afraid to say, “I don’t know – let me look into that!”, you should give them a miss. There is no such thing as being “all knowing”. That’s usually a red flag. 

Don't Buy Life Insurance Based Solely on Name Recognition 

Name recognition isn’t all it’s cracked up to be. Sure there are long-standing companies that are very deserving of their stellar reputations. BUT name recognition is also the result of a GREAT marketing team and lots of money to get the name out there. This doesn’t mean they’re the right company for you. That’s why you need to use an independent agent to find out which one suits your personal needs. Remember using a tied agent could cost you a bomb in the end. 

Do Your Homework - Check Out the Insurers Financial Rating 

If you’re looking for a life insurance company with a good foundation do your homework. Financial ratings give you a good idea of how a company handles their monetary situation. This information is readily available online. Life insurance is an important long term investment so be sure you’re happy with your selection before you sign on the dotted line. 

Get Real About Your Financial Needs BEFORE Your Meeting 

Sit down and crunch some numbers before you meet with your agent. This will give you a better idea of your needs. The typical rule of thumb is your life insurance coverage should be 7 – 10 times your salary.  If you have young kids, 10-15 times your salary. So if an agent comes over and tries to sell you coverage over and above this figure without justifying it, you know you may be dealing with someone who either doesn’t know what they are doing or is dishonest. 

NOTE* Many people do underestimate the amount of coverage they will need to protect their family’s lifestyle. For example, let’s say you’re 40 years old, earning $80k per year and expecting to retire around age 65. If you do the math, that’s $2 million of income your family won’t see if something happens to you tomorrow. So $1 million of protection is the very least you sould have!

Stay Away From Permanent Insurance Unless You Really Need It 

Permanent life insurance is a great tool…

….IF you need it. The thing is term life insurance works best for most people most of the time. If you’re looking for the most affordable coverage to protect your family for a set period of years, term is the way to go because it’s flexible and inexpensive. 

Don’t get me wrong I love permanent coverage – for the right situations. Don’t let an agent with commission breath lead you astray. 

If You Get a Bad Vibe Get a Second Opinion 

Trust your gut. If you’re working with an agent that makes you feel uncomfortable or scammed, get a second opinion. There’s no reason to rush into a purchase. Doubts are red flags. Stop, get more information, and only sign on the dotted line when you’re comfortable. 

Check Out Reviews 

Google offers a lot of information about the people we deal with. Why not check out the reviews for the agent you’re using. If you see numerous complaints or even one terrible review that rings true, move to another resource. I will, however, add one caveat. The life insurance process is fraught with stress. Death isn’t something people want to talk about or deal with. People who feel they’ve had a bad experience are far more likely to write a review than those who have a smooth transaction. Life Insurance companies and agents are at the whim of customers who may or may not be 100% ethical or rational. So look at the reviews critically. If you see 30 great reviews and a sudden ding you may want to take it with a grain of salt. 

I’m not sure where it all went wrong when it comes to people’s perception of life insurance scams, but I can definitely see some holes in the industry that make people feel frustrated. 

First and foremost, I want clients to feel like they are in the driver’s seat when it comes to life insurance. You don’t need to blindly rely on the advice of a tied agent that will only promote their products. Nor do you have to listen to an independent agent that’s trying to get you to purchase a policy you can’t afford. 

But don’t let any of this dissuade you from buying life insurance it’s one of the best purchases you ever make and if you have dependents and debt your loved ones will thank you for planning. 


Avoid Life Insurance Scams Policy Architects

For the most part, life insurance agents are honest. Sure there are those that rely on unethical practices and others who are motivated solely by commissions, but this is the exception, not the rule. The beauty of the internet is that you can connect with terrific agents with shining reputations at the touch of the button. 

At Policy Architects we treat each and every client like they are a member of our family. If you aren’t happy, then our business fails to thrive. Frankly, we think it’s bad karma. So if you’re looking for an independent agent that will find the right solutions for your circumstances at the best possible price give us a call today.