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Life Insurance Scams on the Rise

Daniel Powell, a 34-year-old San Diego man, was sentenced to 10 years in federal prison last month for conning seniors out of more than $5 million. How? He ultimately did so using life insurance policies. Unlike many financial scams that focus on the promise of riches or quick money, these scams often focus on giving seniors stability and predictability. Following the recession and housing market collapse just a few years ago, many seniors have turned to annuities and life insurance policies for a more stable and secure long-term liquidity during retirement. However, where there is demand for a product, there will be a plentiful supply of con artists.

Attorneys commonly find out about these scams long after the culprit has skipped town with the loot, so to speak. As one might guess, many unscrupulous cons are out there hustling seniors to purchase junk insurance policies, and they are employing quite an impressive array of tactics.

Non-existent investments

One of the clearest and most common cons is to tell a senior that all their money will be securely placed in commodities, bonds, or other valuable investment vehicles. Many seniors are convinced that their money will be safe in gold, silver, coins, mineral reserves, oil, and other investments that sound solid. After all, who hasn’t heard the commercials aimed at seniors that tout the incredible investment opportunities available to those who buy gold or coins? Well, this is precisely one of the tools Powell used; he told his victims that he was investing the money in “gold mines.” He had no interest in gold mines. This, among many other moral failings, led to his arrest and eventual sentencing.

Bad annuities

One of the more common financial scams being perpetrated on seniors is the annuity scam. Annuities can be great for those who want stable retirement funds. Some seniors may have a lump sum of money and fear losses in the market or simply want to ensure they have enough monthly income to survive for the rest of their lives. If they simply use their money, it may run out. But one can use the money to buy an annuity, which will be guaranteed to pay out a set amount every month for a set period of time, even for the rest of one’s life.

In other cases, a person may not want to make a lump sum payment for an annuity. Instead, he or she may wish to make premium payments for a set number of years, similar to whole life insurance products. Once paid for, the annuity is there to begin paying based on the contract for a set period or for life.

Like any investment, there is an element of gambling. The senior bets that he or she will outlive the money and figures the monthly payouts will exceed what they would have had. The annuity company bets that the cash premium is going to be more than the monthly payouts.

There are plenty of variations on annuity scams, but one example is a Florida woman who, at 82, cashed in all her life savings and investments to buy some annuities from a deadbeat salesman. As is common with annuities, she was not allowed to cash out for 10 to 15 years without facing huge penalties. However, the agent received a $52,355 commission from the sale, yet she could not pay the excessive fees. She nearly lost her entire net worth, but fortunately the state stepped in and protected her. Not all seniors are so lucky.

It never hurts to ask for advice

Insurance agents, brokers, and financial planners can all be very knowledgeable and helpful at times. Remember, however, that these people are first and foremost sales people. Their goal is to sell a product. If they give bad advice, it is very difficult to get money back. In fact, unless their conduct is fraudulent, as in the cases shown above, they generally may hide behind a cloak of investor judgment. On the other hand, attorneys are within a self-regulated profession that demands that its members owe clients a duty of loyalty and zealous representation.

If you or a loved one is considering any significant investment in life insurance or annuity products late in life, you should immediately consult an elder law attorney at the Millhorn Elder Law Planning Group who can review the matter and offer prudent suggestions. Your plan may be perfectly wise and above board, but it never hurts to get a second opinion from someone who is sworn to protect your interests. Reach out to our Florida attorneys today for immediate assistance.

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