State RegulationsAZ specificDifficulty 2/5
An investor offers to pay the premiums on a new life policy for an elderly Glendale resident, planning to acquire the policy and profit from the resident's death. Under A.R.S. 20-443.02, how is this arrangement classified?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A.R.S. 20-443.02 prohibits exactly this pattern: a policy initiated or procured for the benefit of a third party with no insurable interest, who plans to profit from the insured's death. The investor-borne premiums and planned resale make the Glendale arrangement STOLI, which Arizona law bans.
Why the other options are wrong
- B) The policy was initiated for the investor's benefit from the outset, so it is STOLI and cannot be cured by calling it a settlement.
- C) No buy-sell or option contract exists between the parties, so no insurable interest arises under A.R.S. 20-1104.
- D) No employer-employee relationship or benefit plan is involved.
Memory hook
Investor-borne premiums for resale = STOLI.