In Investor-Originated Life Insurance (IOLI), who typically pays the premiums?

In Investor-Originated Life Insurance (IOLI), the policy owner is typically the one who pays the premiums. This scenario arises when investors acquire life insurance policies on individuals, not necessarily tied to an insurable interest. The policy owner holds the contract and is responsible for all premium payments to keep the policy in force.

In this arrangement, the insured individual, who may be unaware of the investment nature of the policy, does not pay the premiums directly. Since the policy owner is the investor, they generally have a financial interest in the insured's demise, as it would lead to a payout from the insurance company. The beneficiary, who may or may not be the policy owner, only receives the death benefit when the insured passes, and the insurance company only provides the payout after the policy matures or a claim is made. Therefore, the responsibility for premium payment lies squarely with the policy owner in an IOLI structure.