Overview
More than half of the state legislatures are considering legislation that would help deter a growing but abusive practice called stranger-originated life insurance (STOLI). Under these contrived arrangements, the good, social purpose upon which life insurance is based--financial protection for families and businesses--is turned on its head. In these schemes, investors entice seniors to take out policies and then profit when the seniors die. The sooner they die, the higher the profit. In effect, STOLI promotes wagering on human life.
ACLI Position
STOLI skirts state insurable interest laws intended to prevent life insurance from being used to wager on human life. STOLI can leave insureds with unknown or undisclosed costs and adverse tax and legal implications. ACLI is working actively to enact legislation in all states to combat this practice. Legislation supported by ACLI wouldn't affect the property rights of policy owners who acquired life insurance in good faith. ACLI’s approach targets transactions where the intent at the outset is to transfer the death benefits to investors.