Business Owned Life Insurance
Business owned, or corporate owned, life insurance, which is sometimes referred
to by the acronym COLI, is an insurance policy on the life of a business' employee.
Typically the business owns the COLI policy, pays the policy premiums and is the beneficiary
under the policy. Business owned life insurance is not new; in fact, it's been around
for 80 years or longer. Although some of the tax advantages of these policies disappeared
in the late 1990s, business owned life insurance policies remain very useful for
funding specific benefit programs like employee stock ownership plan (ESOP) repurchase
obligations, shareholder agreements or nonqualified benefit plans.
Usually, in a COLI arrangement, a business purchases a policy (or policies) on the
lives of particular employees. As stated above, the business pays the policy's premiums.
If the insured employee passes away, the business receives the policy's death benefit.
Business owned life insurance offers the advantage of stability, as it allows the
business the unique opportunity to anticipate accurately the availability of funds
for future benefits for the price of a premium that is usually fixed and therefore
predictable.
This Web site is intended for general information purposes only. It does not nor is it intended to constitute legal, tax or investment advice. United Financial Systems, Corporation is not a lawyer, registered investment advisor or investment advisor representative, and is not engaged in the practice of law or the business of investment advice.