Reviewed by Richard Reich, CEO and licensed agent with over 25 years of experience.
Why is there Life Insurance Fraud?
Life insurance fraud happens when someone intentionally gives false, misleading, or incomplete information to get approved for coverage, lower their premiums, or collect benefits they are not entitled to receive. It may involve lying on an application, hiding medical conditions, faking documents, or submitting a false death claim. Fraud usually occurs because someone is trying to gain money unfairly, but it can lead to denied claims, canceled policies, legal trouble, and higher insurance costs for honest policyholders.
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Life insurance fraud can take many forms, from falsifying medical information to intentionally causing a policyholder’s death. Not only is this illegal, but it also has severe consequences for the insurance industry and society. In this article, we will explore the various types of life insurance fraud, its impact, and what can be done to prevent it.
Isaac Aguigui
In 2014, 22-year-old Army soldier Pvt. Isaac Aguigui was convicted by a military judge of the murder of his pregnant wife, Sgt: Deirdre Aguigui, and her unborn child. Aguigui collected $400,000 in life insurance benefits from the death of his wife and another $100,000 for funeral costs provided by the U.S. Army.
What makes this story extra frightening is that Aguigui allegedly planned to use the insurance payout to fund a terrorist group comprised of himself and a few other soldiers. The terrorist organization, known as FEAR (Forever Enduring, Always Ready), was allegedly plotting, among other things, to bomb a public park, poison apple crops in Washington State, and even assassinate the president. At the time of his conviction, Aguigui was already serving a life sentence for the murder of two people who had allegedly discovered the group’s plans.
Julia Merfeld
21-year-old Julia Merfeld of Muskegon, Michigan, is currently serving a 5-20 year prison sentence for soliciting the murder of her husband in 2013.
Merfield, looking to cash in on her husband’s $400,000 life insurance policy, approached a coworker about helping her pull off the murder. The coworker immediately notified the police and then arranged a meeting between Merfield and a friend of his that he said would be willing to kill her husband.
The coworker’s friend was actually an undercover detective who secretly filmed two conversations in which Merfield explicitly describes how, where, and when she wants the murder to take place. Luckily, in this case, police were able to intervene before anyone was hurt or killed.
Molly and Clayton Daniels
Molly Clayton lost her husband in a fatal car accident in 2004. At least, that’s what she told the police. What actually happened was much more bizarre.
In an attempt to fake her husband’s death and collect on his $110,000 life insurance policy (life insurance fraud), Molly convinced Clayton to dig up a body from a local cemetery, dress it in his clothes and then stage his own fiery death. And that’s exactly what he did. However, police noticed right away that the circumstances surrounding the accident seemed a bit suspicious.
There were no skid marks leading up to the site of the accident, and the fire was determined to have started in the front seat, rather than the engine of the vehicle.
The scheme completely fell apart when DNA testing revealed that the burned body found in the driver’s seat was actually that of a woman. Police later found that Molly had also forged documents in an attempt to create a new identity for her husband, including a fake birth certificate and driver’s license.
She had even introduced her two children to a new “boyfriend” Jake Gregg, who was actually just Clayton with dyed black hair.
Pastor Kevin Pushia
In 2010, Former Pastor and founder of a small Baltimore, MD church, Kevin Pushia, was convicted of the murder of Lemuel Wallace, a blind, developmentally disabled man associated at Pushia’s nonprofit organization. Pushia confessed to having hired two men to pick Wallace up from his group home and shoot him in a nearby park bathroom.
Pushia was found out when the insurance company noticed he was listed on Wallace’s $400,000 life insurance plan. He had apparently posed as Wallace’s brother to get his name added to the policy thereby committing life insurance fraud.
The two men accused of committing the act were eventually acquitted and Pushia is now serving a life sentence for ordering the murder, with another 45 years added on for the additional charge of life insurance fraud.
“Iron” Mike Malloy
Probably one of the most infamous (and bizarre) cases of insurance fraud is that of the murder (after 5 attempts!) of Michael Malloy in 1933. After Malloy, a homeless man and severe alcoholic had upset the owner of his favorite speakeasy (by frequently passing out face down on the bar) the owner and 5 friends hatched a little scheme.
Their plan was to take out a life insurance policy on Malloy and then get him to drink himself to death so they could split the payout. But when he failed to die from alcohol poisoning, they realized they’d have to change their approach.
They poisoned him with antifreeze, turpentine, rotten food, even rat poison, and he just kept on waking up. One night, they waited for him to pass out at the bar, dragged him outside in sub-zero temperatures, poured freezing water on his bare chest, and dumped him in the snow thinking he would surely freeze to death. Nope, Malloy just strolled into the bar the next day thinking he had simply gotten too drunk the night before and passed out in the park.
The 5 conspirators, dubbed ‘The Murder Trust’ by the New York media, eventually did kill Malloy via carbon monoxide poisoning. All five were soon caught and sent to prison where four of them were executed in the electric chair.
The Silver Lining
Fortunately, life insurance companies are meticulous when it comes to paying out benefits and the research involved in processing a claim has led to more than a few convictions of fraudsters, murderers, and would-be murders looking to benefit from someone else’s death.
So while these crimes are gruesome, tragic, and downright terrifying, we can all rest a little easier knowing that most of the time, justice is eventually done.
When used Properly – Life Insurance Helps Surviving Loved Ones
After listing how life insurance might profit a fraudster, it’s good to remember that life insurance products are a tool to help us mitigate financial risks like replacing an income, paying off a mortgage, funding a college education, or just making sure surviving loved ones will be able to move on financially after the unexpected loss of a loved one.
For more information about how life insurance can help your surviving loved ones and offer peace of mind for you, call the insurance professionals at LifeInsure.com at (866) 868-0099 during normal business hours or contact us through our website.
Frequently Asked Questions
What is life insurance fraud?
Life insurance fraud happens when someone intentionally gives false, misleading, or incomplete information to an insurance company. This can happen when applying for coverage, managing a policy, or filing a claim for life insurance benefits.
What are common examples of life insurance fraud?
Common examples include lying about medical history, hiding risky hobbies, misstating income, using fake documents, or filing a false death claim. Fraud can also involve taking out a policy on someone without their knowledge or consent.
Why do people commit life insurance fraud?
Most life insurance fraud happens because someone is trying to gain money unfairly. They may want lower premiums, coverage they would not normally qualify for, or a policy payout they are not legally entitled to receive.
Can lying on a life insurance application be fraud?
Yes. Knowingly giving false answers or leaving out important information on a life insurance application can be considered fraud. Even small details may matter if they affect approval, pricing, or the insurer’s decision to issue coverage.
Can life insurance fraud cause a claim to be denied?
Yes. If an insurance company discovers fraud, it may deny the claim, cancel the policy, or refuse to pay benefits. This is especially true when the false information affected the approval of the policy.
How do insurance companies detect life insurance fraud?
Insurance companies may review medical records, death certificates, prescription histories, financial documents, and claim details. They may also use fraud databases, investigators, and third-party reports to confirm whether the information provided is accurate.
What happens if someone commits life insurance fraud?
The consequences can include denied claims, canceled coverage, loss of premiums paid, fines, lawsuits, or even criminal charges. Fraud can also make it harder for someone to qualify for insurance in the future.
How can policyholders avoid life insurance fraud problems?
The best way to avoid fraud problems is to be honest and complete on the application. Answer every question truthfully, review the policy carefully, and work with a licensed insurance professional if anything is unclear.
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Reviewed and written by: Richard Reich, CEO and Life Insurance Broker 25+ Years Experience
This content has been reviewed for accuracy and compliance with current insurance standards.
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Richard Reich
President, LifeInsure.com · Independent Life Insurance Broker
In my 30+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs.
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Last Updated on June 5, 2026 by Richard Reich
