State RegulationsAZ specificDifficulty 1/5
What is stranger-originated life insurance (STOLI), which Arizona prohibits under A.R.S. 20-443.02?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under A.R.S. 20-443.02, stranger-originated life insurance is the initiation or procurement of a policy by a third party who has no insurable interest in the insured, with the plan to profit from the insured's death, typically by reselling the policy. Arizona prohibits this practice because it converts life insurance into a wager on a stranger's life.
Why the other options are wrong
- A) A charitable organization owning the policy as irrevocable beneficiary with the insured joining the application is expressly permitted under A.R.S. 20-1104.
- B) A legitimate life settlement of an in-force policy is a regulated transaction under Arizona's settlement chapter, not STOLI.
- D) Policy loans are a standard contractual provision and have nothing to do with the STOLI prohibition.
Memory hook
Strangers at the start, betting on death = STOLI = banned.