Why do Employers Purchase Corporate Owned Life Insurance on Their Employees?
• To recruit and retain top talent as well as Provide Key Man Coverage for the Business
• Funds are readily available to replace an employee in the event of an untimely death
• Many Public, Private and Not‐For‐Profit companies own Corporate Owned Life Insurance
What is Corporate Owned Life Insurance?
• Death Benefit Only Plan Using Permanent Indexed Universal Life Insurance
• Used For Key Man Insurance And/or Employee Benefits
• Vesting Rules Are Flexible And Determined By The Sponsor since this is a Non‐Qualified Plan
• Death Benefits Are Typically Split 50% To The Employer And 50% To The Beneficiaries Of The Employees
What are The Benefits Corporate Owned Life Insurance?
• Upon insureds death, beneficiary receives typically 5‐10X the employee’s annual salary at plans start date
• Allows the employer to recoup the cost of the plan (typically with a positive return)
• Portion of the death benefit (typically 50%)
• Use of any excess cash value (100%)
• Properly structured plans eliminate taxes on premiums & interest to employees
• Transactions are balance sheet neutral/accretive ‐ cash value of the policies are guaranteed
to equal at least 100% of the premiums paid in the first 7 years.
• If the employee leaves the company before the benefit vests, 100% of the death benefit goes to the employer
How It Works
• Once the Policy Cash Value Exceeds the Loan Amount (typically starting in years 7‐10), The Interest On The Loan Can Be Rollup
Into The Loan Balance. At That Time The Sponsor Can Also Take Out Policy Loans Which Can Be Used For General
• Guaranteed Issue Can Be Used For Multi‐life Transactions With 10 Or More W‐2 Employees.
• Eligible Employees Must Be Less Than 70, Earn $75,000+/yr. & Be Considered White Collar Employees.
• Most policies will have an Enhanced Cash Surrender Rider Eliminating/Reducing the Need for Additional Loan Collateral.
• Most Clients Prefer a 1 yr. Point To Point Index Strategy on The S&P 500 Index With a 0‐1% Floor And A Cap Of 10‐13%.
• Face Amounts Per Employee Are Typically 5 To 10X Salary Up To A Maximum Of $4‐6 million.
Call or email me to discuss this important topic. I would love to hear from you.