New Type of Life Insurance is Being Investigated

Florida insurance regulators are taking a closer look at a fairly new type of life insurance that is targeted at seniors.  It is called “stranger-owned” life insurance or STOLI. 

Basically, these life insurance policies are taken out by investors on the elderly.  The investor pays the premiums and eventually becomes the beneficiary of the policy, usually after a couple of years.  Policyholders are given incentives by investors, which generally come in the form of lump-sum payments.  Critics of these life insurance policies say that it is nothing more than a scheme by speculators to make big money off older people.

Florida law does allow people to sell their life insurance policies.  State regulators admit that selling a policy can be beneficial for individuals who may have terminal illnesses.  The law does state though that when a life insurance policy is purchased, the person must have an interest in the person who is insured. 

These policies are usually done in private, which makes it difficult to regulate.  State regulators do have concerns and are looking into this practice.  A hearing was held by the state Office of Insurance Regulation regarding stranger-owned life insurance.  Information is being gathered to determine if new laws are needed to regulate this practice.