The U.S. Senate Special Committee on Aging held a hearing yesterday, "Betting on Death in the Life Settlement Market – What's at Stake for Seniors," to determine whether or not life settlements are an appropriate investment for seniors.
The hearing had a particular focus on stranger originated life insurance, or STOLI.
The National Association of Insurance and Financial Advisors issued a statement applauding the Committee's attention to life settlements.
"STOLI transactions are designed to evade state insurable interest and other laws and allow unrelated investors without an insurable interest in the insured to arrange in advance for their ownership of life insurance policies," the organization said in the statement. "It is the intent of all the parties at the time of policy inception that sometime after two years from the time of policy issuance the insured will transfer the policy benefits to those investors, who then profit when the insured dies. The sooner the policyholder dies, the greater the investor's profit."
"In a legitimate life settlement, the insured initially took out the policy for a legitimate, recognized insurance purpose, such as to provide financial protection for family members. The decision to settle the policy is made sometime down the road when the insured's circumstances change and the insured determines the original purpose for the insurance policy no longer exists."
Click here to view the hearing.
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