Bank Owned Life Insurance
Bank-Owned Life Insurance (BOLI) has proven to be a cost-efficient and effective way for banks to offset rising employee benefit costs.
By definition, BOLI is life insurance purchased and owned by a bank that can be used to offset a variety of pre-retirement and post-retirement employee benefits. Examples
include financing supplemental executive retirement and deferred compensation programs and post-retirement medical obligations – all of which constitute a major expense for most financial institutions.
Typically, a bank purchases a life insurance policy on a group of its directors and officers and over time uses the cash value and proceeds from the policy to recover its employee benefit expenses. BOLI enjoys certain tax benefits (the income is mostly tax-free) that make it an attractive alternative to funds invested in traditional taxable investments. However, there are risks that must be taken into account.
Rofkahr Consulting has the latest on BOLI and how it affects your organization.
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