BOLI
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Life insurance policies purchased by banks on key employees to help fund employee benefits and manage costs.
Summary
BOLI (Bank-Owned Life Insurance) is a type of life insurance policy purchased by banks on the lives of their employees, where the bank is both the policyholder and beneficiary. Banks use BOLI as a tax-advantaged investment vehicle to help offset employee benefit costs and generate long-term returns. The cash value grows tax-deferred, and death benefits are generally received tax-free by the bank.
Usage Context
Understanding BOLI is important when studying bank asset management, employee benefit funding strategies, tax-advantaged investment vehicles for financial institutions, and regulatory compliance in banking operations.
Common Confusions
- Thinking BOLI provides benefits to the employee or their family
- Confusing BOLI with employee group life insurance benefits
- Assuming BOLI requires ongoing employee participation
- Believing BOLI is the same as key person insurance
