Investor-originated life insurance (IOLI) is a financial arrangement where investors finance the life insurance premiums for individuals, typically seniors, in exchange for a future return upon the death of the insured. In this arrangement, the investors are the primary beneficiaries as they stand to receive a portion of the death benefit, often with interest, when the insured person passes away. The investors hope to profit from the spread between the premiums they pay and the death benefit they eventually collect.

On the other hand, the insured individuals might benefit from obtaining life insurance coverage without having to pay the premiums themselves. However, IOLI transactions have faced criticism and regulatory scrutiny due to concerns about potential abuse and the ethical implications of strangers profiting from the death of insured individuals. Some argue that such arrangements may encourage speculation on human life rather than providing genuine insurance protection. It's essential for individuals considering IOLI to carefully assess the terms, potential risks, and ethical implications before entering into such agreements.

A contingent beneficiary in the context of life insurance refers to an individual or entity designated to receive the policy's death benefit if the primary beneficiary is unable to do so. The contingent beneficiary becomes entitled to the proceeds in the event that the primary beneficiary predeceases the insured, is unable or unwilling to claim the benefit, or if specific conditions outlined in the policy are not met. The contingent beneficiary designation provides a secondary plan for the distribution of the life insurance proceeds, ensuring that the intended individuals or entities receive the financial benefit.

It's a crucial component of life insurance planning as it helps prevent uncertainties and potential complications in the event of unforeseen circumstances. Policyholders should carefully consider and update their beneficiary designations, taking into account life changes such as marriages, divorces, births, or deaths, to ensure that their life insurance benefits align with their current wishes and circumstances.