Life Insurance FundamentalsQuestion 135 of 315
Stranger-Originated Life Insurance (STOLI) is best described as:
a.A standard term life policy sold to a small business owner
b.A life policy converted from term to permanent after age 65
c.A scheme where an investor convinces an insured to buy a policy intending to transfer it to the investor for cash
d.A group life policy issued through an employer
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 §10113.1Practice all 315 questions free — no signup required.
Related questions on this topic
- An applicant has well-controlled high blood pressure and is otherwise healthy. The underwriter accepts the application but adds a flat extra premium for the cardiovascular risk. The applicant has been placed in which risk class?
- What is the primary purpose of the Medical Information Bureau (MIB) report in life underwriting?
- Marco buys a $500,000 life insurance policy on his spouse. They divorce three years later, and Marco continues paying premiums. When his ex-spouse dies four years after the divorce, can Marco still collect?
- Two business partners want to make sure that when one dies, the surviving partner can buy out the deceased's share and the family receives cash. Each partner owns a life policy on the OTHER partner. This is a:
- Acme Manufacturing buys a life policy on its CEO. Acme pays the premiums, is the policyowner, and is the beneficiary. What kind of arrangement is this?
- What is the main estate planning advantage of an Irrevocable Life Insurance Trust (ILIT)?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Life & Health Insurance License Exam · How we review