Widows and widowers are fooled into paying up for non-existent life insurance policies: Internet Scambusters #657
It can be easy to be tricked into falling for a life insurance scam, especially when you're under stress -- and it can be costly.
In this week's issue, we have the lowdown on the three most common scams in this category including a heartbreaking one that targets newly bereaved spouses.
We're also alerting you to a hack attack you probably never thought would happen and how you can find out if you're a victim.
Now, here we go...
Life Insurance Scammers Trick Bereaved Spouses
Scammers are playing a cruel trick on widows and widowers by claiming their deceased partner had a life insurance policy that promises to pay out a large benefit.
The crooks claim to be from an insurance company or even Social Security, and tell victims their partner was behind on the premium payments but if they make up the shortfall they'll get the full insurance payout.
Usually the payout is said to be $40,000 or $50,000 and the scammer asks for $2,000 or $2,500 for unpaid premiums.
Of course, they want the money to be wired to them or loaded onto a prepaid debit card -- usually the first telltale sign of a scam -- and, sadly, the life insurance policy doesn't exist.
The scammers get their information by combing newspaper obituary notices, which often give away a fair amount of information about the deceased person.
They can then collect more information from Internet searches so that, by the time they contact their victims, they can put together a pretty convincing story that includes details of where the deceased worked and suggest they got their insurance policy either via a past employer or a club to which they belonged.
Their attack comes at the most vulnerable time for their victims. Newly-widowed people are usually suffering a considerable amount of stress and may not be thinking straight when the scammer strikes.
And if they also find themselves under financial pressure, which, again, is not unusual for a bereaved person, they can be more easily fooled into falling for this cruel trick.
Even people who have been widowed for some time are not immune from scams relating to their passed partner.
For instance, crooks will scan older obituaries and contact widows and widowers saying their former partner had some kind of unclaimed property which will be returned to them, again for a fee.
Scammers have even been known to ask their victims to send a copy of a death certificate and other documents to a PO Box number, supposedly for confirmation but, in reality, to be used for identity theft.
As we suggested earlier, the best way to avoid these scams is never to wire money or send prepaid cards or details to someone you don't know.
Also, if you are in the unfortunate position of recently being widowed, it's a good idea to ask a trusted friend or relative, in the short term, to oversee financial and other matters relating to the deceased person.
And if you think such a life policy may exist, contact your state Insurance Commissioner's Office, which maintains records of all life insurance policies. Start with this interactive map.
News of another widespread life insurance scam was reported recently by the financial information and stock trading organization NASDAQ and financial website MainStreet.com.
The scam, known as "twisting," involves insurance brokers or agents converting clients' existing annuity policies into another annuity with a different company.
The agent reaps a high commission from the new company, while the revised annuity may not offer benefits that are as good as the original policies or may not even be accessible for up to 15 years.
"Life insurance scams such as (this) are sweeping the nation as state regulators report tens of thousands of complaints from consumers," says MainStreet.
"Particularly vulnerable are seniors who may have lost some of their nest eggs in the economic downturn and are prey to unscrupulous insurance agents who promise to make them whole."
To ensure you avoid this scam, work with a broker or financial adviser you know and trust, or one recommended to you by friends or relatives.
Always be wary about trading or exchanging annuity policies and, if you can, work with a professional who does not receive commission and therefore is more likely to provide impartial advice.
Another dubious practice known as "Stranger-Oriented Life Insurance" involves the sale of a policy to an older person, which is later sold on to investors who then benefit when the purchaser dies.
The original purchaser is usually paid a fee for agreeing to do this and the "investors" may even pay the premiums for the initial qualifying period -- usually two years -- before the policy can be transferred to them.
We say it's "dubious," rather than a scam, because these transactions may not be illegal in some states (though they are in others) but, either way, insurance companies regard them as malpractice and have been known to sue seniors who agree to take part.
Furthermore, people who do agree to buy and sell policies on this basis often find they are subsequently barred from taking out future life insurance policies when they really need them.
Alert of the Week
You may have read recently about hackers gaining access to more than 100,000 taxpayer accounts held by the IRS, which could be used for future identity theft.
You may be wondering if you were one of the victims.
Well, if the IRS didn't contact you to tell you, then you're unlikely to have been a victim.
And if you were a victim, the IRS is offering free credit monitoring and has pledged to closely monitor tax returns in victims' names in future years.
BEWARE: IRS notifications will come by letter, not by phone or email, and will not request personal confidential information. So watch out for scammers trying to catch you out by posing as the IRS and asking for confidential information.
That's all for today -- we'll see you next week.