How Does BOLI Work?
The bank purchases a specially designed insurance product on the lives of a group of employees. In its simplest form, the bank pays the premium(s) and owns the policies. The bank is also the beneficiary of the insurance. The employees do not receive any of the insurance benefits directly, nor do they pay any of the premiums. The coverage does not replace or interfere with any other insurance provided by the bank, e.g. group term life insurance. There can be variations on the beneficiaries and the payout of the death benefits depending on the desired plan design. The policies the bank buys produce income for the bank. The income earned is higher than the income the bank can earn on most alternative investments of equal quality and risk. The income is tax deffered-tax free if held to the death of the insured.
Related Questions
- How Do the Department of Housing and Urban Development (HUD) and the Oregon Bureau of Labor and Industries (BOLI) Enforce the Fair Housing Act?
- Beyond banking regulations, are there limits on how much Bank Owned Life Insurance (BOLI) a bank can purchase?
- What are the tax consequences of surrendering Bank Owned Life Insurance (BOLI)?
