What Are The Different Types of BOLI Policies?
There are two policy types characterized as: General Account and Separate Account An explanation of each follows. General Account With an Annual Fixed Yield contract, the carrier invests the premium in its investment portfolio. This is sometimes called a General Account or Portfolio Product. The carrier’s portfolio is made up of 5 to 10 year investments including corporate bonds, mortgages and real estate. The carrier credits a yield to the policy based on its portfolio yield. The yield is set annually. Normally the carrier will charge a spread of about 200 basis points less than its portfolio yield. The resulting net yield is what the policy will earn each year. Part of the point spread is charged for the insurance coverage and is ultimately returned to the client via the payments of insurance proceeds. An easy way to think of a portfolio yield is to calculate a 5 to 10 year corporate bond yield less 100 to 200 basis points. The bank is a general creditor of the insurance company. Sep
