The Ohio Department of Insurance advises consumers to proceed with caution when considering participation in a "Stranger/Investor Originated Life Insurance" (STOLI) life settlement arrangement. Consumers need to be fully aware that, unlike a traditional policy where the insured's loved ones are beneficiaries of the death benefits, in a STOLI arrangement, an investor group-strangers-will likely acquire an interest in the life of a participant.
Other possible consequences to consumers participating in STOLI arrangements are limits on future insurability, higher premiums for additional coverage and/or tax liabilities.
STOLI life settlement arrangements are typically promoted to consumers between the ages of 65 and 85 and include:
- allowing someone to purchase life insurance on your life in exchange for an immediate lump sum payment of some amount;
- entering into a contract for "free" or "no-cost" insurance on your life;
- purchasing a life insurance policy for the sole purpose of selling the policy to a third-party, whether immediately or in the future; or
- materially participating in transactions leading up to the purchase of a life policy for any of the above-stated purposes.
The following websites contain valuable information about investing, including information about STOLI life settlements:
- www.finra.org (non-profit broker-dealer regulation, consumer advisories)
- www.quatloos.com (non-profit website to educate consumers about viaticals scams)
- www.nasaa.org (state securities' regulators association; provides consumer investment advice)
You can verify licenses of agents, insurance companies, and life/viatical settlement providers and brokers at the Department's website www.insurance.ohio.gov or through the Department's toll-free Consumer Help Line 1-800-686-1526.