Bank-Owned Life Insurance - BOLI

Loading the player...

DEFINITION of 'Bank-Owned Life Insurance - BOLI'

A form of life insurance purchased by banks where the bank is the beneficiary, and/or owner. This form of insurance is a tax shelter for the administering bank, as it is a tax-free funding scheme for employee benefits.

BREAKING DOWN 'Bank-Owned Life Insurance - BOLI'

Banks use BOLI contracts to fund ever-increasing employee benefits at a much cheaper rate. The process works like this: the bank sets up the contract, and then makes payments into a specialized fund set aside as the insurance trust. All employee benefits that need to be paid to particular employees covered under the plan are paid out from this fund.

All premiums paid into the fund, as well as all capital appreciation, are tax free for the bank. Therefore, banks can use the BOLI system to fund employee benefits on a tax-free basis.

RELATED TERMS
  1. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  2. Life Insurance

    A protection against the loss of income that would result if ...
  3. Tax Shelter

    A legal method of minimizing or decreasing an investor's taxable ...
  4. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  5. Tax Shield

    A reduction in taxable income for an individual or corporation ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
Related Articles
  1. Home & Auto

    A Look At Single-Premium Life Insurance

    Want to provide for your dependents and finance your own long-term care? Learn more here.
  2. Home & Auto

    Can You Trust Your Trustee?

    Ignorance and incompetence can cost you money. Make sure your trustee is up to the task.
  3. Budgeting

    Life Insurance

    Life insurance is an important component of basic financial planning. Find out how life insurance works and how insurance companies are able to profit through providing financial security to ...
  4. Insurance

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  5. Insurance

    Indexed Universal Life: Flexibility and Safety

    A universal life insurance policy is a flexible form of permanent life insurance that offers the low-cost protection of term life with a savings element.
  6. Investing News

    Where in the World Should You Put Your Money Now?

    The U.S. stock market is reeling and interest rates remain skimpy. Nevertheless, even now there are still a few ways to get a respectable return.
  7. Investing Basics

    Contingent Convertible Bonds: Bumpy Ride Ahead

    European banks' CoCos are in crisis. What investors who hold these high-reward but high-risk bonds should know.
  8. Financial Advisor Technology

    Top Problems with Financial Data Aggregation

    A new front in personal finance technology—data aggregation—seeks to make our financial lives easier. But here's why it may be stalling.
  9. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  10. Investing News

    How Interest Rates Can Go Negative

    Central banks from Europe to Japan have implemented a negative interest rate policy (NIRP) in order to stimulate economic growth.
RELATED FAQS
  1. Does the FDIC cover credit unions?

    The Federal Deposit Insurance Corporation (FDIC) does not cover credit unions. The FDIC only insures deposits in banks and ... Read Full Answer >>
  2. What are Santander's escheatment services?

    Escheatment is the process where an individual's assets are considered abandoned and the custody of said assets is assigned ... Read Full Answer >>
  3. Do beneficiaries pay taxes on life insurance?

    Generally speaking, when the beneficiary of a life insurance policy receives the death benefit, this money is not counted ... Read Full Answer >>
  4. Do banks have working capital?

    The concept of working capital does not apply to banks since financial institutions do not have typical current assets and ... Read Full Answer >>
  5. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  6. Who decides to print money in Canada?

    In Canada, new money comes from two places: the Bank of Canada (BOC) and chartered banks such as the Toronto Dominion Bank ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center