Stranger-originated Life Insurance (STOLI) and Investor-originated Life Insurance (IOLI)

True or False: STOLIs do not violate the principle of insurable interest

False, insurable interest ensures that a person purchasing a life insurance policy is interested in longevity rather than death of the insured

What can insurers do if they suspect STOLI transaction is occurring?

Insurers can take an aggressive legal stance against it

Stranger-originated life insurance (STOLI)

Life insurance arrangement in which a person with no relationship to the insured (a stranger) purchases life insurance policy on the insured's life with intent of selling the policy to an investor and profiting financially when the insured dies

STOLI shortened down

STOLIs are financed and purchased solely with the intent of selling them for life settlements

Investor-owned life insurance (IOLI)

a third party investor who has no insurable interest in the insured initiates a transaction designed to transfer the policy ownership rights to someone with no insurable interest in the insured and who hopes to make a profit upon the death of the insured or annuitant