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Bank-Owned Life Insurance (BOLI) has become increasingly popular as an effective risk-management option for banks big and small in recent years. BOLI is basically life insurance that a bank purchases on the lives of their executives, with the primary goal of protecting the bank from economic losses due to the death of these personnel. When the executives die, tax-free death benefits are paid to the bank, covering any costs of employment, such as unvested retirement savings, severance, deferred compensation, salary bonuses, or other incurred expenses.
BOLI is a form of complete life insurance and can be used to fund employee benefits such as long-term disability and life insurance benefits, health care benefits, and retirement benefits. It allows the bank to extend benefits to staff and earns from the cash accumulated in the policy. They access this value as needed, as long as the bank owns and funds the policy. This cash value can also be borrowed against at attractive rates, allowing the bank to increase its liquidity or fund other expenses.
The credit quality of the BOLI issuer is of critical importance for banks. Banks are often concerned about the ability of the insurer to meet its long-term obligations and the financial stability of the issuer. Banks tend to choose from a wide range of insurers and evaluate each insurer on multiple criteria such as financial strength, service, underwriting, and cost. This makes it important to find the right provider with a strong track record, good customer service and a commitment to security.
In conclusion, Bank-Owned Life Insurance (BOLI) offers an effective risk-management option for banks with the ultimate goal of protecting the bank from economic losses. It is used to fund employee benefits and the death benefits can be used to cover any costs of employment, such as unvested retirement savings and deferred compensation. The credit quality of the BOLI issuer is crucial for banks and it is important to find the right provider with a strong track record and good customer service.
BOLI is a form of complete life insurance and can be used to fund employee benefits such as long-term disability and life insurance benefits, health care benefits, and retirement benefits. It allows the bank to extend benefits to staff and earns from the cash accumulated in the policy. They access this value as needed, as long as the bank owns and funds the policy. This cash value can also be borrowed against at attractive rates, allowing the bank to increase its liquidity or fund other expenses.
The credit quality of the BOLI issuer is of critical importance for banks. Banks are often concerned about the ability of the insurer to meet its long-term obligations and the financial stability of the issuer. Banks tend to choose from a wide range of insurers and evaluate each insurer on multiple criteria such as financial strength, service, underwriting, and cost. This makes it important to find the right provider with a strong track record, good customer service and a commitment to security.
In conclusion, Bank-Owned Life Insurance (BOLI) offers an effective risk-management option for banks with the ultimate goal of protecting the bank from economic losses. It is used to fund employee benefits and the death benefits can be used to cover any costs of employment, such as unvested retirement savings and deferred compensation. The credit quality of the BOLI issuer is crucial for banks and it is important to find the right provider with a strong track record and good customer service.