Corporate Owned Life Insurance – Key Employees
Corporate Owned Life Insurance Key Employees
If you are researching the world of life insurance for the first time, then you are probably learning that there are a number of different options out there. As a matter of fact, there are life insurance policies for a number of different lifestyles and financial portfolios. You are probably also going to learn about some insurance policies that may seem a little bit strange when you are first reading about them. One such kind of insurance policy is corporate owned life insurance. This is also known under the acronym COLI. This is a kind of insurance policy that a corporation or business takes out on an employee. There are a lot of rumors, misconceptions, and judgments that are placed on this life insurance options. You may be wondering what to believe.
First, COLI is a life insurance policy that has been traditionally taken out on employees that are of great value to a corporation. These are normally executives and other key members. These people also tend to own a number of shares that are related to the primary business. The reason that COLI is useful to corporation is that if a key executive or member were to pass away, there would be a large sum of money spent of replacing that figure. You have to consider training and hiring costs. Likewise, if that key figure were to have owned large shares in the company, there would be a good amount of money spent in recovering the loss.
COLI often times get a bad reputation because there has been some abuse of this kind of policy in the past. Some businesses were aggressively insuring a number of different employees, regardless as to if they were key employees or executives or not. They would take out cheap insurance plans with premiums that were exceptionally minimal. Likewise, the pay out of benefits would also be minimal. Instead, however, the interest would accumulate at such a rate that it would be profitable for the business. There have been regulations put in place to restrict this kind of abuse.
If you are a business owner and you are interested in purchasing corporate owned life insurance for your employees, you will want to make sure to insure only those who are essential to the running of your business. In order to get the best insurance policy, you may want to sit down with legal aides or accountants and decide which policy will best protect your business.
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