Life Insurance FundamentalsQuestion 135 of 716
Stranger-Originated Life Insurance (STOLI) is best described as:
a.A scheme where an investor convinces an insured to buy a policy intending to transfer it to the investor for cash
b.A group life policy issued through an employer that covers an entire class of its employees at no extra cost to them
c.A standard term life policy sold to a small business owner to fund a buy-sell agreement with a partner
d.A life policy converted from term to permanent coverage after the insured has reached age 65
Explanation
STOLI is a wagering arrangement: an investor finances or convinces an insured to buy a life policy with the intent to transfer ownership to the investor. Because the investor has no genuine insurable interest, STOLI is banned in California.
Law Reference: Cal. Ins. Code §10113.1This topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)