Investor’s will sometimes initiate life insurance policies are that have no insurable interest in the lives of the applicants. Instead investors are looking to settle the policy. This type of activity is called “stranger-owned life insurance arrangements” and might violate “Louisiana statutes or case law involving insurable interest, prohibition on wager policies, rebating, prohibition on ‘wet ink’ life settlements, premium finance, and usury.” The following are the do’s and don’ts for questions on an application:
Life insurers cannot ask:
- The intention of the applicant to use a policy as collateral for a loan.
- Whether an applicant has sold an earlier policy through a life settlement transaction.
- Whether an applicant knows about life settlements.
Life insurers looking for illegal SOLI arrangements can ask questions about whether an applicant has:
- Received a cash advance or other inducement to buy the life insurance policy.
- Been offered “free insurance.”
- Agreed to sell a policy to a particular investor.
- Entered into a finance agreement that entitles a lender or investor to a portion of the death benefit above and beyond the repayment of principal and interest on the loan.
Comment Preview