Is It a Pyramid Scheme To Sell Life Insurance

Is It a Pyramid Scheme To Sell Life Insurance

Written by Deepak Bhagat, In finance, Published On
April 14, 2023
Last modified on April 29th, 2023

Life insurance looks like a very tempting offer. Sure, no one wants to think about the death of their own or their loved ones. However, the thought that the people you want to take care of will not be left in trouble without you is reassuring. Recently, more and more often you can hear the question about different companies – is selling life insurance a pyramid scheme? And it is extremely important to answer it. We will figure out if a life insurance pyramid scheme exists and how to recognize it.

What Is Life Insurance?

Is traditional life insurance a pyramid scheme, definitely not. Are there companies that build their insurance business on the principle of a pyramid, definitely yes. Now we will understand what traditional life insurance is.

Life insurance is a service that assumes that you pay premiums every month, and after the death of the policyholder, his beneficiaries receive a certain amount of money or the content.

Each state has its laws governing this area, but all have the main provisions:

  • Insurer – a company providing insurance services.
  • The insured is the one who bought the policy.
  • Insured – the one whose life is insured (the insurer and the insured person do not have to be the same person).
  • Benefit – the amount paid by the insurer in the event of the death of the insured person.
  • Beneficiary – the recipient of the payment under the policy.
  • The payment is the monthly installment under the policy.

It would seem that everything is very simple and transparent, but what an American income life scam can be like here? Now let’s look deeper into the problem.

Life Insurance Pyramid Scheme – What Is It?

Pyramid Scheme To Sell Life Insurance

To understand how the pyramid works, let’s look at a few schemes.

Pyramid Scheme

This scheme is similar to the infamous Ponzi scheme. That is, the company accepts new investors into its ranks and they pay an initial fee. Investors who came to the company earlier receive their dividends from the money of newcomers. That is, while people join the pyramid, it exists, as soon as the influx ends, the pyramid collapses. A distinctive feature of such pyramids is that they do not produce anything, do not conduct business, and enrich themselves only at the expense of deceived investors. These are pure American income life scams.

A pyramid scheme differs from a Ponzi scheme in that it requires recruiting new members to generate income. The well-being of all participants, but, first of all, the tops, will directly depend on this.


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Multi-level marketing is more of a business scheme. Some companies are quite legal and successfully operate under this scheme at the international level.

The main difference is that companies with this scheme of activity have a product: cosmetics, jewelry, household goods – everything that is in mass demand and requested can become a commodity or a product.

That is, technically, an insurance company may not be a fraudster, but in fact, it may be a banker’s life pyramid scheme.

Insurance Companies That Are Built on the Principle of a Pyramid

To understand whether a company is a pyramid, you need to know how to recognize the scheme by certain signs. A traditional insurance company hires insurance agents and they sell policies using all the possibilities, including the benefits of live chat service for insurance agencies.

The pyramid hires agents who are required to bring more agents. That is, the task of the pyramid is not to sell policies and provide services, this is not paramount, the task is to attract as many sellers as possible, who, in turn, will also attract sellers. This is the American income life pyramid scheme, although theoretically, it has a product – insurance services. But the most interesting thing is that the company itself does not provide these services.

It sells the services of other insurers. That is, financially the pyramid is not burdened by anything, it does not have expenses to cover policies, or pay benefits. Her task is to hire as many sellers as possible to increase turnover and get as much profit from them as possible.

In fairness, we note that each insurance company has some properties of an insurance pyramid in which there is a top, managers, and agents. But a responsible company puts the qualifications of its staff, their training, and work with clients in the first place, and the pyramid is only interested in hiring.

The main sign that this is an insurance pyramid scheme is that you are not so much being sold insurance, or told about a new plan or product, as they are campaigning to become a member of the team. You are obliged at the same time to sell the insurance policy, but this is not the goal of the agent. And here is the result of 65% of American adults who do not have a life insurance policy, they simply do not know where to buy it and why they need it. Doesn’t this remind you of anything? Let’s take the family first life insurance pyramid scheme as an example. The company was founded in 2013 and has grown to a large size. What is its essence?

Family First Life Pyramid Scheme

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The first thing to say is that the recruitment of agents in any insurance company is not very simple. Unlike other MLM schemes, where anyone can come from the street, the insurance agent must be licensed. That is, the applicant must be trained and pass the exam. In this case, is family first life a pyramid scheme, yes. This company has the main sign of a pyramid – hiring is more important than production (that is, sales training). A new member must study, but only enough to pass the exam. That is, if you need insurance tips, this agent is unlikely to be useful to you.

Family First Life Scam Work

Consider the scheme of work of this company. One of its products is mortgage life insurance. Such a policy is of interest to many homeowners and those who have owned real estate for a long time, but they may already have it. Most of all, insurance agents are interested in those who have bought a house, who have approved a mortgage loan, and so on.

The company contacts a potential client. If he is interested in an insurance product, and answered a call or an e-mail, the contact is sold to an agent and he is already obliged to bring it to a deal. It is not known whether the agent will be able to do this, especially since employees do not undergo training. It is also interesting that this company does not have insurance products.

They sell the policies of other insurers. But we have already talked about this above. Is family first life insurance legit it turns out that quite, signs of fraud can be seen in the sale of personal contacts, but in general, the company’s activities do not fall under the definition of a financial pyramid. Recall that financial pyramids are not legal, they consider it a fraud and are prosecuted. And multi-level marketing is considered a business scheme that is successfully implemented by some companies.

Another thing is how comfortable agents feel. At seminars, wads of money, and photos of luxurious villas and yachts are shaken in front of them, promising the same prosperity and well-being. But at the same time, they forget to tell that the work of a real insurance agent is an art that requires complex training. This work is really hard and not everyone can cope with it.


Insurance is a very delicate and important area. Everyone who buys a policy is ready to bear regular expenses and even hardships. But every insurance owner wants to be sure that in exchange for premiums, he will receive a decent level of service for free or with minimal expenses. The topic of life insurance is especially sensitive, especially when it comes to family insurance when spouses want to provide for each other and their children in the event of the worst. There is no need to talk about any pyramids.

If the company’s activities are not prosecuted by law, this does not mean that it is honest and deserves trust. Everyone makes his own choice, but a true professional in the field of insurance will never go to work in a pyramid scheme and will not advise any of his clients to insure in such companies.

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