State Insurance
The Illinois Division of Insurance sent out a warning to consumers not to participate in a state insurance fraud that is being called a “Stranger/Investor Originated Life Insurance” (STOLI) arrangement. The Division neither sanctions nor approves STOLI state insurance arrangements. Both these state insurance transactions and those who are party to these state insurance transactions may be subject to the Illinois Insurance Code and other applicable laws of the State of Illinois applying to state insurance.
These STOLI arrangements do not resemble traditional life state insurance transactions. Most of the time, the consumer or the insured applies for state insurance and the insured’s loved one become the beneficiaries of the death benefits. In a STOLI arrangement, this investor group, who are strangers, started the insured’ s application and want to acquire an interest in the life and probably profit from the death of a participant. Of course state insurance companies reserve the right to not pay benefits on STOLI arrangements.
What defines a STOLI arrangement is that the state insurance is purchased as a vehicle for investment and not to provide for the insured’s beneficiaries. There are various descriptions of STOLI arrangements. A few are: zero premium life insurance, estate maximization plans, no cost to the insured plans, whiles refer to new issue life settlements, high net worth settlements, or non-recourse premium finance transactions.
Usually, STOLI arranges are promoted to consumers between the ages of 65 and 85. They also include:
- Allowing someone to purchase Illinois health insurance on your life in exchange for an immediate lump sum payment of some amount.
- Allowing someone to purchase state insurance on your life in exchange for a partial payment of the policy’s face value to your beneficiaries upon your death.
- Entering into a contract for “free” or “no-cost” insurance on your life
- Purchasing a life state insurance policy for sole purposes of selling the policy to a third-party whether now or in the future.
Someone can verify the license of an Illinois state insurance producer at the Division’s website (http://www.idfpr.com/doi/default2.asp) or by calling the Division’s toll-free Consumer Assistance Hotline at 1-866-445-5364.
Obviously, state insurance laws and licensing is confusing enough already. People don’t need frauds like STOLI arrangements further mucking up the waters. It’s even quite disrespectful for these people to try to take advantage of state insurance laws and of you. They are intending to manipulate state insurance laws into making profits not only your life, but of your death. Surely, you would want your loved ones to be your beneficiaries in the event of your passing, but these strangers are trying to steal what you spent your life earning and what to leave behind to the people you cared about the most.
Not only is this disrespectful, but it’s disgusting. That’s why the Illinois Division of Insurance exists. The Division protects consumers interested in state insurance by providing assistance and information. Furthermore, it regulates the state insurance industry’s market behavior and financial solvency, but also fosters a competitive marketplace. Even while regulating business, the Division keeps you, the state insurance consumer, in mind.
