Under Investor-Originated Life Insurance (IOLI), the investor pays the premiums to take out a large life policy for the person. The investor pays what in exchange?

• A. The death benefit payable on death
• B. The policy's surrender value
• C. The insured's salary during retirement
• D. The policy's cash value growth

Answer: (A)

In Investor-Originated Life Insurance, the investor funds the premiums to obtain a large payout that is guaranteed when the insured dies. The key payoff the investor is exchanging the premiums for is the death benefit payable on death. The policy’s cash value or surrender value are internal features that may grow if the policy remains in force, but they are not the primary return the investor seeks in this arrangement. A salary or other compensation for the insured isn’t part of the transaction, so the death benefit is the core payoff the investor anticipates.