The Latest Scare: Have You Checked On Your Life Insurance Policy Lately?

This little scheme involves “investors,” which in reality are complete strangers, meeting an elderly person and talking them into taking out a life insurance policy and then naming the “investor” as the beneficiary. The insured individual on the policy, or more accurately, the victim, usually receives a relatively small cash payment as consideration for naming the schemer as beneficiary.

So prevalent has this become that it has taken on its own moniker, STOLI, which stands for STranger Oriented Life Insurance. Not to be confused with a popular vodka brand.

But I digress. With a STOLI scam, the insurance policies in question aren’t term life insurance policies. Although it is possible to use term life, most STOLI “investors” prefer to use permanent insurance policies like whole or universal life insurance because these usually contain a guaranteed payout with few stipulations. STOLI scammers love to target the elderly whom are generally assumed to be most likely to die in a fairly short period. The problem here is that someone stands to gain upon the death of someone else without any sort of real relationship to get in the way. Basically, there are ghoulish “investors” standing around, hoping for the swift deaths of their “investments.”

So, you might ask, What’s wrong with the picture?” The real idea behind life insurance is that an insured’s beneficiaries or loved one’s, who would suffer financial and emotional distress upon losing a loved one, will be financially taken care of upon their death.

Generally, most families aren’t going to sit by their mom and dad’s death bed counting down the clock and wishing the old folks would up and die to get their hands on a life insurance check. That is why life insurance works so well. There has always been that balance. With term life insurance it is even more of a factor since a beneficiary receives nothing unless the insured dies within the term period. A STOLI scam, however, involves “investors” with no emotional interest in the person insured by the policy. Their interest is 100% financial in nature and they will only gain when the person dies. They lose nothing when the person dies, unlike the loss that most people experience upon the death of a beloved.

Sadly, most of these STOLI “clients,” or more accurately, victims, are the elderly. The unscrupulous investor usually pays nothing more than a token amount to the victim compared to the value of the death benefit on the policy, with full knowledge that they are going to reap an inordinate profit once the insured person dies. Now, the investors do also pay the remaining life insurance premiums, but that is nothing more than a thin pretense of having an insurable interest in the insured since their relationship only extends to the matter of the insurance policy.

Let me ask you, do you relish the thought of a complete stranger waiting at your loved ones’ death bed, crossing their fingers and waiting for a swift demise? When it comes time for our moms and dads to pass away, I believe we want to know that the people around them are supportive and encouraging and have nothing but their well-being in mind. Talk to your elderly loved ones about this article, and make sure you know the beneficiaries on the policy.