subject: Corporate-Owned Life Insurance (COLI) – Could Your Corporation Benefit? [print this page] Corporate-Owned Life Insurance (COLI) Could Your Corporation Benefit?
Corporate-Owned Life Insurance(COLI) policies are designed for corporations and partnerships to have flexible life insurance policies where they are both the owner and the beneficiary. You may be interested in securing such policies for your corporation if you want to informally fund a Deferral and Supplemental Executive Retirement Plan (SERP). Your policies can also be a part of Split Dollar Plans, assuming the plans comply with certain requirements. Policies like this are priced to have the lowest impact on the corporation's balance sheet while delivering a high payout at the completion of the term.
There are a few requirements you must meet in order for your corporation to qualify for Corporate-Owned Life Insurance(COLI) policies. First, the policies must be considered part of a plan that is sponsored by the corporation, and the premium that is paid at the start must be submitted by the employer. The total first-year premium for all policies taken out must equal a minimum amount, typically around $100,000. Usually, at least two policies will need to be taken out by two different policy holders for all the benefits of Corporate-Owned Life Insurance to apply.
If you choose Corporate-Owned Life Insurance (COLI)that falls under the category of variable life insurance, you will have the opportunity to decide where a portion of your premium payments will be invested. This gives you the potential to expand your cash value even more, by putting money into a number of stocks, bonds, and money market options. You must understand that your success in these markets, even though they are managed by some of the finest investment management firms, is not guaranteed. Your cash value will fluctuate as your investments perform successfully or poorly. They may ultimately become worth far more or less than the premiums you are paying to fund the investments.
If you structure loans and withdrawals from your policies properly, you will benefit from tax-free funds. Also, death benefits from Corporate-Owned Life Insurancepolicies are income tax-free for the beneficiaries. With these kind of policies, premiums are flexible and are allowed to change based on your current financial needs. While there are minimums and maximums, you can generally time your payments the way you want and pay the amount you feel comfortable with. When you consider all the benefits of Corporate-Owned Life Insurance(COLI), you may be interested in learning more about it for your corporation.
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