Life insurance can be an important estate planning tool. If you use it, you need to make sure that you are being honest with the insurance company, or you and your family could possibly be charged with fraud.
Life insurance can be extremely convenient. If you are in good health, it is not difficult to get.
Since policies pay out immediately upon death, life insurance is a good way to make sure that families have disposable income after a breadwinner passes away. It can also be used for other purposes in estate planning, such as equalizing inheritances between children when other assets are difficult to divide.
When you sign up for life insurance, you will normally need to fill out some forms about your medical history and lifestyle. You might also need to undergo a medical examination.
You might be tempted to fudge your answers on the paperwork a little. However, you should never do that because you can be charged with fraud.
Recently, Cincinnati.com reported on one extreme case of alleged fraud in "Feds: Mason family faked life insurance policies, collected $2.9 million and bought Bentley convertible."
In this case, three members of a family purchased life insurance for another family member, who was overweight and who had an extensive history of medical problems.
The family lied on the policy application about all of that and had another family member go to a medical exam and pretend to be the applicant. The insurance was approved and paid, when the family member passed away.
The family then tried to hide the proceeds by purchasing expensive items.
They are being charged with criminal fraud.
While this is obviously an extreme case, it illustrates that you can be caught, if you defraud a life insurance company. If life insurance is a part of your estate plan, make sure that you are honest on the application.
Reference: Cincinnati.com (August 10, 2017) "Feds: Mason family faked life insurance policies, collected $2.9 million and bought Bentley convertible."
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