A life insurance arrangement that circumvents insurable interest is known as what?

The correct answer is related to a life insurance arrangement that bypasses the traditional requirement for insurable interest. This concept refers to situations where individuals take out life insurance policies on the lives of others without having a financial stake or emotional connection to that person.

Investor-originated life insurance describes scenarios in which investors purchase life insurance policies on individuals, often targeting those who are older or have health issues. The primary motivation for the investor is the financial gain that arrives upon the death of the insured. This practice has raised concerns due to the potential for conflicts of interest, as it may encourage decisions that prioritize profit over the well-being of the insured individuals.

Stranger-originated life insurance, while similar, specifically emphasizes the notion of strangers purchasing insurance on the lives of others without insurable interest, forming a distinct category that could also be relevant. However, the term investor-originated life insurance is more commonly used in regulatory discussions regarding these arrangements. Universal life insurance and term life insurance do not fit this context, as they are both types of policies that require insurable interest from the policyholder.