DEFINITION of 'Corporate Ownership Of Life Insurance - COLI'

Insurance policies taken out by companies on their employees, with death benefits payable to these companies rather than to the insured person's family or heirs. Corporate ownership of life insurance (COLI) or corporate-owned life insurance refers to insurance obtained and owned by a company on its employees, where it pays all of the premiums and receives all of the benefits.

COLI is generally used to protect a company from the costs arising from the unexpected death of an employee, as well as to fund employee benefits. Unlike "key man" insurance, which refers to company-owned insurance on directors and top executives, COLI may be taken out on any employee. For this reason, it is sometimes derisively referred to as "janitor's insurance" or "dead peasant insurance."

BREAKING DOWN 'Corporate Ownership Of Life Insurance - COLI'

When the employer of a corporate-owned policy is a bank, the policy is referred to as "Bank-Owned Life Insurance" (BOLI).

COLI is separate and distinct from employee benefit plans, since the only beneficiary is the company, and not the employee or the employee's family. COLI policies provide the same benefits to the owner as other life insurance products - death benefits are not taxable, and investment earnings on insurance premiums can grow tax-free within the policy (unless it is surrendered before the insured party's death).

COLI/BOLI policies have drawn criticism from the media and other parties, which question the ethics of companies benefiting financially from the death of ordinary employees.

RELATED TERMS
  1. Company Owned Life Insurance - ...

    A type of life insurance policy taken out by a company on the ...
  2. Life Insurance

    A protection against the loss of income that would result if ...
  3. Key Person Insurance

    A life insurance policy that a company purchases on a key executive's ...
  4. Wholesale Life Insurance

    A type of employer-sponsored protection against the loss of income ...
  5. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  6. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a ...
Related Articles
  1. 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.
  2. Financial Advisor

    Is Life Insurance From Your Employer Enough?

    Covering the needs of the ones you would leave behind is not easy. But efforts to secure a life insurance policy outside of work should pay off.
  3. Managing Wealth

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
  4. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  5. 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.
  6. 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?
Hot Definitions
  1. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  2. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  3. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  4. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  5. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  6. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
Trading Center