Loading the player...

DEFINITION of 'Stranger-Owned Life Insurance - STOLI'

Insurance that is purchased with the intent of eventually transferring ownership to a third party, usually investors. Stranger-owned life insurance (STOLI) is generally described as the purchase and subsequent sale of a newly issued life insurance policy to an investor or group of investors who have no insurable interest in the person being insured. In other words, the policy enables investors to profit from the death of the insured.

BREAKING DOWN 'Stranger-Owned Life Insurance - STOLI'

There are a couple of ways investors attempt to profit from stranger-owned life insurance. In most instances, the investors can wait for the insured to die and simply collect the payout. Or, if the group of investors is large enough and they have invested in several life insurance contracts, these can be bundled and traded or sold to other investors who are looking to invest in similar investments.

Insurance companies argue that such policies are manufactured and overstate insurable interest at best. Many of the more obvious STOLI loopholes have been closed and insurers themselves are becoming more vigilant.

RELATED TERMS
  1. Life Insurance

    A protection against the loss of income that would result if ...
  2. Key Person Insurance

    A life insurance policy that a company purchases on a key executive's ...
  3. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an ...
  4. Cover Note

    A temporary document issued by an insurance company that provides ...
  5. As Their Interests May Appear (ATIMA)

    Text in an insurance policy that allows other parties to be added ...
  6. Bureau Rate

    A standard price per unit of insurance set by a state's insurance ...
Related Articles
  1. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
  2. Insurance

    Life Insurance

    Life insurance is an important component of basic financial planning. Find out how life insurance works and how insurance companies are able to profit through providing financial security to ...
  3. Insurance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
  4. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  5. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  6. Insurance

    Tips for Helping Clients with Life Insurance Needs

    Life insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
  7. Insurance

    When Life Insurance Isn't Worth It

    So, you're thinking about buying life insurance, but do you really need it?
RELATED FAQS
  1. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  2. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
Hot Definitions
  1. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  2. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  3. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  4. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  5. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
  6. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
Trading Center