State RegulationsNY specificDifficulty 3/5
What is the defining characteristic of stranger-originated life insurance under N.Y. Ins. Law §7815?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under N.Y. Ins. Law §7815, the definition has two anchored elements: timing — the act, practice or arrangement occurs at or prior to policy issuance — and benefit — the policy is originated for the intended benefit of a person who, at policy origination, has no insurable interest in the insured under New York law. The statute expressly carves out lawful life settlement contracts, so later transfers of legitimately obtained policies are not STOLI. This timing element is what separates an ordinary settlement from a prohibited origination scheme.
Why the other options are wrong
- A) Post-issuance transfers through lawful settlements do not make an arrangement STOLI; only origination for a stranger's benefit at issuance does.
- C) The two-year restriction is the separate settlement moratorium under N.Y. Ins. Law §7813(j)(1), and even it has exceptions; it is not the STOLI definition.
- D) Third-party premium payment, by itself, does not make an arrangement STOLI when the policy genuinely benefits a person with an insurable interest.
Memory hook
STOLI turns on 'born for a stranger': at issuance, for someone with no insurable interest.