Look Out for Fraudulent Life Insurance Policies


Buying life insurance is a very expensive, but necessary purchase. The policy is designed to insulate your family from financial disaster in the event of your death. What's more, servicemembers have access to affordable policies through the military, such as Servicemembers Group Life Insurance (SGLI) or Veterans Group Life Insurance (VGLI).

However, some veterans may decide to buy an additional life insurance policy to ensure that their family is properly covered, and some unscrupulous agents out there want to sell you a policy you don't need or can't afford.

For example, in 2006, the Securities and Exchange Commission (SEC) filed a lawsuit against the American Amicable Life Insurance Co. for misleading buyers of its Horizon Life insurance product. The lawsuit alleges that American Amicable agents used deceptive sales pitches and mislead servicemembers into buying policies they didn't need, reports the Honolulu Advertiser.

It's easy to for servicemembers to buy into these fraudulent policies, especially when the agent selling the insurance policy to you is a veteran. The National Association of Insurance Commissioners found that many junior enlisted servicemembers would buy insurance policies they didn't need from an insurance agent that was a veteran, because they saw them as an authority figure.

In an effort to stop these deceptive practices, the NAIC developed a 'Red Flag' advisory that describes misleading life insurance marketing practices. The advisory encourages servicemembers who have experienced deceptive sales practices to contact their Financial Readiness Office or state insurance regulator for assistance.

Here are some deceptive practices and 'Red Flags' to watch out for:

  • Solicitation of insurance products as 'investments' or 'savings' products sold as or with savings or investment products.
  • Non-military personnel posing as financial counselors or advisors on veterans' benefits.
  • Non-military or ex-military personnel acting as investment advisors in a group or classroom.
  • Pressure to rush through the application process, to complete an allotment form or to authorize withdrawal off funds from your bank account for the purchase of a life insurance policy.
  • Agents selling on the base without authorization from your base solicitations officer or the Department of Defense (DoD).
  • Agents selling without a valid license from a state insurance department.
  • Delays in receiving a copy of the contract.


You can also take the following steps to prevent buying unnecessary life insurance policies:

  • Make sure you feel comfortable with the insurance agent and company.
  • Individuals that solicit life insurance on military installations are required to obtain authorization from the DoD as an authorized solicitor and all insurance agents must have a license from a state insurance department. Ask to see the agents' permits or licenses.
  • Decide how much you need, for how long, and what you can afford.
  • Learn what kinds of policies will provide what you need and pick the one that is best for you.
  • Do not sign an application until you review it carefully to be sure the answers are complete and accurate.
  • Do not buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early year of the policy.
  • Don't feel pressured to sign an allotment form during a classroom session related to financial planning that includes a solicitation to purchase life insurance or investment products.

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