Bank Owned Life Insurance (BOLI)

April 29, 2016

Bank Owned Life Insurance (“BOLI”) is a specially designed, institutionally priced life insurance contract where the bank is the owner and beneficiary of the policy.  The life insurance is placed on a select group of executives and, in some cases, members of the Board.  The product can be issued with limited medical underwriting or on a guaranteed issue basis if the group of insured executives is large enough.  Due to the special design of the product, the cash value of the BOLI generally equals or exceeds the initial premium paid from day one.

BOLI is a unique alternative asset that allows banks to achieve favorable after-tax yields through cash value accumulation and death proceeds.  Because the increases in cash value are tax-deferred and the death proceeds are exempt from federal income tax*, BOLI offers banks a superior choice for financing employee benefit obligations, such as non-qualified retirement plans, group life insurance plans, and health care plans.  Even without the preferential tax treatment, BOLI offers one of the most compelling returns per unit of risk in the marketplace.

To learn more about how BOLI could improve your bank’s financial position, please contact us.

* AMT could apply. Policies are modified endowment contracts in most cases. The bank should consult with its own tax advisor.