Bank-Owned Life Insurance - BOLI

AAA

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.

INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  1. Life Insurance

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

    A legal method of minimizing or decreasing an investor's taxable ...
  3. Universal Life Insurance

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

    A contract (policy) in which an individual or entity receives ...
  5. Tax Shield

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

    An umbrella term for life insurance plans that do not expire ...
RELATED FAQS
  1. What are the restrictions for naming a given individual as my contingent beneficiary?

    Life insurance is an important part of estate planning. It allows you to ensure that you can financially take care of the ... Read Full Answer >>
  2. How do I obtain a banker's acceptance?

    Banker's acceptances act like time drafts. They can be created as letters of credit, documentary drafts and other financial ... Read Full Answer >>
  3. Which industries tend to have the greatest EBITDA margins?

    High profit margins can only be attained if cost structure is low relative to revenue. Pricing power is usually the key to ... Read Full Answer >>
  4. What debt/equity ratio is typical for companies in the insurance sector?

    The debt-to-equity ratio is calculated by dividing total liabilities by total equity, and it is used to measure leverage. ... Read Full Answer >>
  5. How does the risk of investing in the insurance sector compare to the broader market?

    Due to economic, demographic and interest rate trends, there is less risk when investing in the insurance sector compared ... Read Full Answer >>
  6. What is the main business model for insurance companies?

    Insurance companies base their business models around assuming and diversifying risk. The essential insurance model involves ... Read Full Answer >>
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. 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.
  4. Professionals

    Indexed Universal Life Policies: Watch These Risks

    By properly vetting indexed universal life policies, advisors and savers can avoid contracts that could prove overly costly over the long run.
  5. Economics

    Explaining Risk-Weighted Assets

    Risk-weighted assets is a banking term that refers to a method of measuring the risk inherent in a bank’s assets, which is typically its loan portfolio.
  6. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.
  7. Chart Advisor

    Trade Strong Trends in Financials with this ETF

    The strong move on the chart of the XBE ETF suggests that now could be the ideal time for traders to look for niche stocks to ride the upward momentum.
  8. Personal Finance

    What Skills Do You Need For An Investment Banking Job?

    Aspiring for the best paid investment banking jobs? Here is the list of top skills that investment banks look for in job candidates.
  9. Insurance

    India's Two-Child Policy

    As of 2014, 11 Indian states have passed laws to restrict Indian citizens from having no more than two children.
  10. Personal Finance

    5 Financial Tools You Can Throw Out The Window

    Bank deposit slip: what's that? Everyday tools of our financial life that went from indispensable to obsolete.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center