BOLI / COLI Case Study: Supports the Bank and its Community

The bank initially purchased BOLI on a few of its executives and directors to informally finance the cost of deferred compensation plans. Later, the bank decided to purchase additional BOLI (on a Guarantee Issued basis) on all of its existing officers where the bank was the owner and sole beneficiary without establishing new or additional deferred compensation or other benefit plans.

The purpose of this purchase was to provide key person protection for the bank, and to offset the bank’s growing existing employee benefit expenses.

Years later, a key officer passed away. The bank received the tax-free death benefit from the insurance which helped the bank through a difficult financial time: lost revenue, employee transition cost and lost goodwill in the community due to the death of the officer. However, with the additional tax-free gain, the bank made a large charitable donation in memory of the deceased officer to one of his passions—a new local community library. Not only did his family love this because of his memory living on in their hometown, but the bank was able to make an additional charitable contribution to strengthen the community over and above its normal giving.

Bottom Line:
BOLI is not just helpful for deferred compensation and executive benefit plans. BOLI, through earnings and life insurance, protects the bank from a key person perspective and helps keep the bank financially strong to better serve the community. A community and its community bank are interdependent—when one is strong, they both thrive.

For more information on how bank or corporate-owned life insurance (BOLI / COLI) can help your business, please contact a consultant at Executive Benefits Network.

See all of EBN’s BOLI / COLI case studies HERE.