Los Angeles, CA commercial litigation attorney Steven Morris talks about insurance premium financing scams, and how these cases typically unfold. He explains that premium-financed life insurance scams are often targeted at high-net-worth individuals, marketed as “free” or low-cost insurance, or insurance that will purportedly pay for itself. The pitch typically involves telling the client that the policy’s cash value will eventually grow enough to cover the cost of the premiums and that the policy can be funded with a loan from a finance company that specializes in these arrangements.

In reality, this type of insurance is suitable only for a very narrow group of people—those who need coverage immediately, cannot pay in cash upfront, and have a clear exit strategy to repay the loan within a few years, usually through a liquidity event such as an inheritance, the sale of a business, or another cash infusion. Death, he emphasizes, is never a legitimate exit strategy for a premium finance loan.

He warns that if an insurance agent suggests the policy will pay for itself upon the policyholder’s death, it is likely a scam. These arrangements are only appropriate for clients who will have the resources to repay the loan in the near term. For anyone planning to hold the policy long-term and pay premiums until death, the deal is almost certainly fraudulent.