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Stranger Originated Life Insurance

From lawbrain.com

Stranger originated life insurance (known as STOLI) is when a stranger purchases a life insurance policy against another's life and funds the premium payments. The stranger may do this as investment for himself or on behalf of an investor.

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STOLI, or stranger-originated life insurance, exists when a third party purchases life insurance issued on the life of someone else. The new owner could be one person or one entity. The third party pays the premium until the insured's death and receives the life insurance benefit when the insured dies.[1]

The target demographic for insured parties is typically senior citizens, ages 65 to 85. Typically, seniors will purchase an insurance policy using funds provided by a third party while naming the third party as the policy's beneficiary. This arrangement is generally used as an investment tool and includes:

  • allowing someone to purchase life insurance on your life in exchange for an immediate lump sum payment of some amount;
  • allowing someone to purchase insurance on your life in exchange for a partial payment of the policy's face value to your beneficiaries upon your death;
  • entering into a contract for "free" or "no-cost" insurance on your life; or
  • purchasing a life insurance policy for the sole purpose of selling the policy to a third party, whether immediately or in the future. [2]

The return on investment for this financial arrangement is appealing because it's not dependent on the stock market or the insured's financial performance.[3]

Legal Developments

At least 26 states have enacted legislation barring the sale of STOLI insurance policies in their jurisdiction. Another dozen or so states have similar legislation pending.[4]


  1. http://www.livesettlements.net/blog/the_stranger_among_us_betting_on_strangers_life_expectancies/54
  2. http://www.livesettlements.net/blog/the_stranger_among_us_betting_on_strangers_life_expectancies/54
  3. http://www.livesettlements.net/blog/the_stranger_among_us_betting_on_strangers_life_expectancies/54
  4. http://www.lifehealthdisabilityinsurancelaw.com/2009/10/articles/news/better-late-than-never-california-finally-enacts-states-first-stoli-legislation/

External Links

Related Resources on FindLaw

Related Blogs on FindLaw

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See Also


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