Investor/Stranger Owned Life Insurance - Industry on alert

Like other leading members of the life insurance industry, Sun Life Financial is aware of an increased volume and variety of sales techniques known as "stranger owned", "investor owned" or "lending of life" transactions.

Although many life insurance transactions involve well-established and legitimate arrangements for a trust to own a policy, a growing number of transactions depart from appropriate uses of life insurance. Viaticals, life settlements, Stranger Owned Life Insurance (STOLI) and Investor Owned Life Insurance (IOLI) all represent different alternatives for unrelated third parties to gain ownership of life insurance policies. Any program designed to allow speculators or investors to own or have interest in a life insurance policy on the life of a stranger allows investors to profit from the death of the insured.

Protecting and educating your clients

In many Canadian provinces, it has been illegal for a number of years to traffic life insurance policies. Similarly, in many areas of the United States, buying and selling interests in life insurance policies is tightly regulated. By lending or selling a life insurance policy to a stranger, your clients may realize a short-term financial gain, but their potential reduced insurability has a direct impact on meeting future protection needs of their families or beneficiaries. It's critical for you to counsel your clients on the value of retaining policies in-force, protecting insurability, and avoiding potential adverse tax consequences and possible legal disputes with these types of transactions. While applications involving bank assignments will generally be acceptable, Sun Life Financial may not accept an application for life insurance in other situations if the objective is for the policyholder to sell or immediately assign the policy to an unrelated third party.

Our underwriters continue to be diligent in identifying proposed sales that are not consistent with our guidelines. Thank you for your effort in making certain every application discloses all information and your clients are aware of the negative consequences of selling or lending a life insurance policy.

Contact: Call 1-800-800-4786, options 1, 4, 1, or e-mail