Corporate-owned life insurance (COLI) is a policy that you, as the businessowner, take out on the life of one or more of your employees, where you can serve as the owner and beneficiary. Your employee typically has no interest in the policy besides being a named insured.
COLI can offer a number of benefits to an employer wanting an informal funding vehicle for nonqualified deferred compensation (NQDC) plans and other employee benefits. This enables the business owner to borrow against the cash value that accumulates under the policy, to pay premium or plan benefits. When designed properly it also provides tax-free build of cash value.
Corporate-owned life insurance can also be used to:
- Provide key employees a pre-retirement death benefit
- Fund a key-person life insurance program
- Provide a liquid savings vehicle for cash reserves and retained earnings
Contact an adviser to learn about more reasons that employers turn to COLI.