Most Common Life Insurance Frauds in India

What is Life Insurance Fraud in India 2025?

Life insurance fraud involves overstating the severity of an eventuality covered under life insurance, like death, accidental disability, critical illness, or other such incidents. A person may also register false claims and fake evidence, provide inaccurate or incomplete information in the claims form, and submit duplicate claims for the same incident. Let us look at the different types of fraud committed in India

What are the Most Common Types of Life Insurance Frauds?

Following is the list of the most common types of life insurance fraud committed in India:

• Medical Provider Fraud: In this type of fraud, the medical provider or the hospital provides the insurer with a bill-charging service that is not offered to the life assured or billed at a higher rate than required.

• False Information Fraud: If the policyholder provides false or incomplete information in the application form or when buying the policy like hiding pre-existing illnesses or smoking habits to get lower premiums. 

• Alteration Fraud: Someone alters the policy details without the policyholder's knowledge or approval. It can be by changing the nominee/beneficiary or the sum assured of the life insurance policy.

• Identity Theft Fraud: It occurs when some individuals try to buy a life insurance policy using someone else's identity or name by using their personal information and claiming the policy's benefits.

• Fake Policy Fraud: Fraudsters in India pretend to be insurer representatives and try to sell fake policies online to unsuspecting customers, stealing their money. Before buying a suitable policy, you should check with the insurer to see if the representative is legitimate.

• Claimant Fraud: In this type of fraud, the policyholder might submit the claims form with fake documents attached for an eventuality that didn’t occur. It can also include exaggerating or overstating injuries or accidents.

Note: It is suggested to calculate the term plan premium on the term life insurance calculator online tool by Policybazaar before buying.

What Happens on the Discovery of a Life Insurance Fraud?

When life insurance fraud is discovered in India—whether during policy issuance or claim settlement, the consequences can be severe and legally binding:

• Immediate Policy Termination or Claim Rejection:
  If fraud is detected during underwriting (e.g., false disclosures about health or income), the insurer has the right to terminate the policy. If discovered at the time of claim, it will be rejected under Section 45 of the Insurance Act, 1938 (as amended in 2015), especially if the fraud is proven within three years of policy issuance.

• Loss of Premiums Paid:
  In most fraud-related terminations, the policyholder may forfeit all premiums paid, especially for willful misrepresentation. Insurers are not obligated to return premiums if fraud is proven.

• Criminal Proceedings:
  Life insurance fraud is punishable under the Indian Penal Code (IPC). Fraudsters may face imprisonment, fines, or both. IPC Sections 420 (cheating) and 464/468 (forgery) are commonly invoked in such cases.

• Civil Liability:
  Insurance companies may initiate civil lawsuits to recover any financial loss or damages caused by fraudulent activity. In severe cases, this can involve garnishing property, freezing bank accounts, or asset seizure.

• Blocklisting and Future Denial of Coverage:
  Individuals involved in fraud may be blocked across multiple insurance companies via shared industry databases. This can result in the denial of future life, health, or general insurance coverage.

Note: Check all the best term insurance plan in India.

How Can I Avoid Life Insurance Frauds in India 2025?

Here are a few things you can do to avoid life insurance fraud in India:

• Always check that you buy the life insurance policy from a legitimate insurer or aggregator

• Make sure only to provide accurate and up-to-date information when filling out the application form 

• Track your policy details and updates like changes in phone number, beneficiary, or other such aspects

• Do not make premium payments from unverified sources or share confidential information

• Apply for loans, check fund performance, and check extra benefits like bonuses on the company website only

• Do not share personal information or KYC details when filling out the life or term insurance form from unknown sources 

Final Thoughts

Life insurance frauds pose a real threat to the benefits claimed by the policyholders and the overall integrity of the insurance industry in India. If accused of fraud, you could lose all life insurance benefits and might even be denied from buying one in the future. Therefore, to ensure the financial security of your loved ones in your absence, you need to be aware of the most common life insurance frauds and try to avoid and report them.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

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