L&HMImedium
A Michigan investor with no relationship to a senior consumer pays the senior to apply for a $1M life policy that will be assigned to the investor at issue. Under MCL 500.2207, this arrangement is BEST characterized as:
AA permissible viatical settlement, because the senior voluntarily agreed to the assignment for valuable consideration at policy inception
BA permissible third-party ownership arrangement, provided the investor files a notice of beneficial interest with DIFS within 30 days
CA taxable but legal investment vehicle, so long as the investor continues paying all premiums and the senior retains no reversionary interest
Stranger-originated life insurance (STOLI) — void for lack of insurable interest
Why this is the answer
The scenario describes stranger-originated life insurance (STOLI), in which a stranger procures a policy on another's life as an investment without insurable interest. Under MCL 500.2207 such contracts are void as wagering agreements at inception.
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