Brian McCracken

Bank-Owned Life Insurance (BOLI): An Overview

Bank-Owned Life Insurance, more commonly referred to as BOLI, is a form of life insurance purchased by banks where the bank is the owner and beneficiary of the policy.

There are various benefits when it comes to bank-owned life insurance, including that it enables banks to:

  • Generate tax-advantaged income to offset and recover the costs of employee benefit plans (including healthcare, group term life insurance, retirement benefits, and deferred compensation)
  • Generate stable revenue from non-loan sources and enhance the other non-interest income component of the income statement
  • Allow for competitive recruitment and retention by sharing a portion of returns with key executives

Today, we have Brian McCracken, VP and Account Executive Director at Newcleus, giving a high-level introduction to BOLI.

Here’s what he has to say.

What is BOLI?

Bank-owned life insurance (BOLI) is a single premium purchase life insurance policy on the lives of highly compensated individuals.

The bank is the premium payer, owner, and beneficiary of the life insurance policy.

How Does It Work?

Once the premium is paid into the policy, the life insurance company receives the money. It starts gaining interest on day one, so there’s no waiting period for the cash value to grow.

The cash value is non-taxable income to the bank, so if the policy is held for the duration of the contract until the executive passes away, any inside buildup is non-taxable to the bank.

Death benefit proceeds are also received tax-free.

More About What We Do

At Newcleus, 99% of our business is focused on the placement of employer-owned assets: BOLI and CUOLI. We also focus heavily on putting properly designed deferred compensation plans in place for our bank and credit union executives and directors and provide compensation consulting for our customers, which is led by the Compensation Advisory division.

Want to learn more about the Newcleus team? View one of our most recent videos explaining The History Behind Newcleus, as spoken by Daniel Barbaree, President and CEO of Newcleus.