Stranger Originated Life Insurance

Stranger Originated Life Insurance or STOLI is a life insurance policy that is held or financed by a person who has no relationship to the insured person. Generally, the purpose of life insurance is to provide peace of mind by assuring that financial loss or hardship will be lessened or eliminated in the event of the insured person's death. STOLI has often been used as an investment technique whereby investors will encourage someone (usually an elderly person) to purchase life insurance and name the investors as the beneficiary of the policy. This undermines the primary purpose of life insurance as the investors have no financial loss that would occur if the insured person were to die. In some jurisdictions, there are laws to discourage or prevent STOLI.