Bank Owned Life Insurance Deferred Compensation Blog

BOLI: Bank Owned Life Insurance, the What and the Why

Fulcrum Partners Deferred Compensation News

Bank Owned Life Insurance: Executive Overview

  • Bank Owned Life Insurance (BOLI) is an institutional financial product used by the majority of U.S. banks.
  • BOLI involves the purchase of single premium institutionally-priced permanent life insurance on eligible consenting bank officers. The bank is the owner and beneficiary of the policies.
  • Initial lump-sum premium investment equals cash surrender value on day one.
  • Products are no-load, no-surrender charge and all of the income is tax-free if policies are held to maturity.
  • Banks may hold up to 25% of regulatory capital (Tier 1) in BOLI. Many banks own 15% to 25%.
  • To emphasize earnings, policies are structured to maximize investment aspects and minimize expense of death benefit portion of policy.
  • BOLI generates non-taxable profit and loss (P&L) earnings equal to the growth in cash surrender value.
  • A portion of the death benefit may be shared with insured officers via a supplemental life insurance plan.

Why Do Banks Use BOLI?

Bank Owned Life Insurance (BOLI) is a desirable asset for banks. It is used by over 3,200 banks nationwide to offset the rising costs of employee benefits programs. Over $188 billion of BOLI cash values reside on bank balance sheets.

Challenges for Bank Leadership:

  • Attracting and retaining quality management talent
  • Creating management incentives
  • Restoring retirement income shortfalls for key executives
  • Balancing risk with reward for directors

BOLI matches the long-term nature of benefit plan liabilities, while typically providing a higher after-tax return than other bank eligible investments. In a BOLI transaction, the bank insures the lives of a group of select management, pays the premium, owns the cash value and is the beneficiary of the death benefit of the policies.

Bank Owned Life Insurance: Achieve Financial Balance

BOLI may be used for benefit purposes such as:

  • Provide benefits to key employees
  • Retain top directors & executives
  • Protect against loss of critical individuals

BOLI as an asset will:

  • Offset existing benefit costs
  • Post tax advantaged earnings
  • Maximize investment yields
  • Improve bottom line

BOLI OPPORTUNITY

Bank Owned Life Insurance BOLI Opportunity

Learn more here: Institutional COLI/BOLI/ICOLI

And contact the Fulcrum Partners team: FulcrumPartnersLLC.com/team

Check the background of the Fulcrum Partners investment professionals on FINRA’s BrokerCheck.

Securities offered through Valmark Securities, Inc. Member FINRASIPC, 130 Springside Drive, Akron, OH 44333-2431, Tel: 1-800-765-5201. Investment Advisory Services offered through Valmark Advisers, Inc., which is a SEC Registered Investment Advisor. Fulcrum Partners LLC is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc.