Corporate Owned Life Insurance

Corporate Owned Life Insurance (COLI) is a valuable tool for corporations and organizations to build financial performance based on the asset building characteristics of life insurance. As a tax advantaged asset it benefits the corporation/organization in two ways:

  1. Through the tax deferred cash value appreciation; and
  2. The tax free return of cash value gains through death benefit.

As a financial strategy, COLI has been available to corporations for decades. In fact, estimates are that over 65% of Fortune 1000 companies use COLI for the funding of their Supplemental Employee Retirement Plans / SERP. However, as with most good concepts, COLI was stretched as an application and Congress stepped in to codify its best practices in the Pension Protection Act of 2006. Now with these best practices defined by law, COLI can now be well defined as a financial strategy for the purpose of building a corporate asset or as a means to offset the higher costs of employee benefits.

COLI is primarily directed towards:

  • Taxable corporations, although the strategy might fit non-taxable organizations with a large member or donor base or at risk of future decline:
  • Employers & organizations with over 100 or more employees or a smaller base with a significant portion of highly compensated individuals (over $95,000 income earned)
  • Building a stand alone corporate asset or used as an offset to the rising cost of employee benefits.
  • Can be customized by adjusting both carrier and funding application to meet the needs of the clients
  • Can provide the client with literally millions of dollars in long term benefits

The Process

The following steps outline our program:

  1. Initial review of the benefits is completed with the potential client
  2. A census is completed giving basic information for an insurance determination, but not including confidential personal data
  3. A customized client proposal is drawn to illustrate potential applications and financial benefit for the client.
  4. An engagement letter is completed outlining agreement for both parties for further analysis of strategy and working with clients professional resources (accountant, attorney, or both)
  5. Appropriate structure is defined between all professional parties.
  6. Consent forms received from participants
  7. Commitment letters for carriers and funding, if required, are received.
  8. Policy is issued and premiums paid by lender for the full term of the loan
  9. Annual review made between corporation, professional advisors to insure desired performance

For financed option, interest rates and loan terms vary and are extremely competitive based on structure

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