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State warns seniors about life-insurance arrangements with investors

STOLI stands for Stranger/Investor Originated Life Insurance. An example of a STOLI policy is letting investors buy insurance on a person's life in exchange for an immediate lump sum or payment. Ohio Department of Insurance spokeswoman Carly Glick says STOLI arrangements are often promoted through predatory sales practices.

"Often times seniors don't know that they're getting into these arrangements," she said. "They don't understand all the details or its not explained to them; its undisclosed. Sometimes there are even unexpected tax consequences or other undisclosed costs or expenses."

Other STOLI arrangements include a policy bought for the sole purpose of selling it to a third-party or entering into a contract for so-called free life insurance.

"Some of the names that are commonly used to sell STOLI plans right now are, zero-premium life insurance, estate maximization plan, no cost to the insurance plan, free insurance," she said.

State representatives this week introduced a bill that would protect Ohioans from STOLI arrangements. The bill would increase the waiting period to buy or sell an existing policy, and force investors to disclose more information at the onset of the arrangement.