Loading the player...

What is a 'Bank-Owned Life Insurance - BOLI'

A bank-owned life insurance (BOLI) is 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. State Guaranty Fund

    A fund administered by a U.S. state to protect policy holders ...
  2. Life Insurance

    A protection against the loss of income that would result if ...
  3. Wholesale Life Insurance

    A type of employer-sponsored protection against the loss of income ...
  4. Company Owned Life Insurance - ...

    A type of life insurance policy taken out by a company on the ...
  5. Benefit Allowance

    Money that a company or government agency provides to an employee ...
  6. Annual Renewable Term (ART) Insurance

    A form of term life insurance that offers a guarantee of future ...
Related Articles
  1. Financial Advisor

    Why Do Businesses Benefit From Life Insurance on Employees?

    Companies can buy life insurance on their employees and collect the benefit proceeds. Find out why companies want to benefit from the death of their employees.
  2. Retirement

    Why Own Life Insurance in a Qualified Retirement Plan?

    What are the pros and cons of owning cash value life insurance in a qualified retirement plan?
  3. Financial Advisor

    How Life Insurance Can Help With Liquidity

    Life insurance can provide liquidity in personal and business situations when access to capital is essential. Learn how to utilize its unique properties.
  4. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  5. Insurance

    Everything You Should Know About Corporate-Owned Life Insurance

    This type of insurance is a policy taken out on you by your company. Read on to find what it's all about.
  6. Insurance

    Split Dollar Life Insurance: How it Works

    Understanding how split dollar life insurance plans are designed and what tax regulations they must follow.
  7. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  8. Insurance

    Will Insurance Keep Your Business Safe?

    Skilled employees are key to a successful business. Find out how to avoid a financial setback if they leave.
RELATED FAQS
  1. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
Hot Definitions
  1. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  2. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  3. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  4. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  5. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
  6. Merchandising

    Merchandising is any act of promoting goods or services for retail sale, including marketing strategies, display design and ...
Trading Center