Illinois Governor Pat Quinn has signed a new law prohibiting stranger-originated life insurance transactions.
The law, Senate Bill 2091, also aims at protecting state consumers who enter into viatical settlements.
STOLI transactions involve a third party encouraging a senior to acquire a life insurance policy, then paying the premium on behalf of the senior. The third party ultimately sells the policy to other investors.
SB 2091 defines viatical settlements as the sale of an existing life insurance policy for a cash payment that is less than the full amount of the death benefit in the life insurance policy.
In addition to banning STOLI, the law seeks to protect consumers by imposing disclosure requirements and licensing and ethics standards on viatical and life settlement providers.
“While allowing legitimate estate-planning practices, the law protects our seniors as they deserve,” said Michael T. McRaith, Director of the Illinois Department of Insurance.
The bill was sponsored by Senator William R. Haine (D-Alton) and Representative Frank J. Mautino (D-Spring Valley).
The new law “will protect seniors from abusive STOLI transactions while protecting legitimate transactions in the life insurance and life settlement industries,” said Senator Haine.