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Life Insurance Investigation
09/12/08 - 02:32 PM
Associated Press
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A relatively new type of life insurance that is targeted at seniors is getting a close look from Florida insurance regulators.

It’s called “stranger-owned” life insurance, or STOLI.

The way it works is that an investor or “stranger” takes out a significant life insurance policy on an older person. The investor then pays the premiums and eventually becomes the beneficiary of the policy—usually after a couple of years.

In addition to paying the premiums, the investors also offer cash bonuses and pay the policyholder a lump-sum payment in exchange.

Critics say “stranger-owned” life insurance is nothing more than a scheme by speculators to make big money off the elderly.

Under current state law, people are allowed to sell their life insurance policies. State regulators admit selling a policy can be helpful for people like those with terminal illnesses.

However, the law says that when a life insurance policy is purchased, the person must have an interest in the person insured.

Insurance industry representatives say “stranger-owned” policies are usually done in private which makes it tough to regulate.

The state has concerns and is taking a look at the practice.

The state Office of Insurance Regulation held a hearing on stranger-owned life insurance. Officials are gathering information to decide whether new laws are needed to regulate the practice.

About a dozen states have already passed laws to crack down on those who sell stranger-owned life insurance policies.
   
(Copyright 2008 by The Associated Press.  All Rights Reserved.)

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