Life insurance fraud is a black eye on both life insurance companies and life insurance customers. Both parties have been guilty of life insurance fraud and will be again – especially since fraud unfortunately appears to be on the rise by most statistical measures.

Research by non-profit organization The Coalition Against Insurance Fraud finds that life insurance fraud committed by all parties costs an average family $1,650 per year and increases life insurance premiums by 25%.

Life insurers are often guilty of insurance fraud by having their agents “mislead”. This is where the agent seeks to cancel your current insurance policy and replace it with a new one that is paid for with the “juice,” or cash value, in your existing policy. Agents do this to earn more commissions for themselves without having to look for new business prospects. Ripple can increase insurance premiums for the customer and obviously cost them in cash value.

However, there is another insurance fraud practiced by agents called “window”. This is where he is unable to obtain a client or applicant’s signature on a necessary document but already has that signature elsewhere, the agent holds a signed document behind the unsigned document, presses it against a window to make the light shine through, and traces the signature with a pen in order to forge the signature of the client or applicant.

When big-name insurers make their agents do bad things, it makes headlines, but the truth is that the public is more guilty of insurance fraud than the companies are. Of course making false claims is what they do most, which is why all life insurance death payout claims are under investigation.

But providing false background information or financial income is another form of insurance fraud consumers often engage in. They may be embarrassed by their medical history or income, or they may realize that if they tell the truth their coverage will diminish or their premiums will be too high. If a life insurance company discovers that someone lied on its application, it has the right not to pay the claim or not to pay the death benefit in full depending on the circumstances and the policy.

But there are things that life insurance buyers can do to protect themselves from insurance fraud, because they don’t have the large investigative resources that life insurance companies do.

Remember, when it comes to life insurance, if it sounds too good to be true, it probably is. There is no free lunch.

Keep all of your life insurance paperwork, including getting receipts for every penny you give your agent, and never ignore notifications from your life insurance company.

Life insurance is never free and neither is a pension plan, although some policies can really become self-financing – but it never starts out that way.

Never purchase any coverage that you feel strongly is unnecessary, never let yourself be pressured, and never borrow to fund life insurance.

Although it can be part of an investment portfolio, life insurance’s first role is to protect against the unexpected – and most people don’t need life insurance in their later years. It’s supposed to be temporary.