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.