A Manhattan resident has owned a life insurance policy on her own life for years and no longer needs it. Through a licensed New York life settlement broker, she sells the policy to a licensed provider for more than its cash value. This transaction is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under N.Y. Ins. Law §7815, stranger-originated life insurance arrangements do not include lawful life settlement contracts as permitted by the article, provided they are not undertaken to evade its regulation. Here the policy was originated by the owner on her own life — a clear insurable interest — and only later sold through licensed intermediaries in a regulated transaction, which is exactly what the life settlement article permits. New York separately restricts settling a policy during its earliest years, subject to statutory exceptions, under N.Y. Ins. Law §7813(j)(1).
Why the other options are wrong
- B) The purchaser's lack of insurable interest at settlement is beside the point; stranger-originated life insurance turns on who the policy was intended to benefit at origination.
- C) What the owner does with the proceeds has no bearing on the stranger-originated analysis.
- D) No insurer consent is required — an existing policy is the owner's property, which she may settle through the licensed market.
Memory hook
Seasoned policy, owner's choice, licensed market — a lawful settlement, not STOLI.