Benefit 2. Protecting Business With COLI
For those who run a business, the life insurance "cash value" generated from one's long-term investments can sometimes pay the premiums on a corporate-owned life insurance policy, or COLI. For decades, commercial banks have been purchasing key-person life insurance on executive individuals — with benefits payable to the organization and/or the family of the employee, upon death. Now, corporations and non-profits can achieve the same benefits.
COLI policies can give businesses the opportunity to fund benefit plan expenses, while increasing net income for the company overall. For instance, companies that have substantial costs to pay out for group life, medical, and other insurance plans can finance these costs with COLI.
Many business owners look to enhance and protect their investments with COLI, because it can earn a competitive after-tax yield when compared to other investments, act as a hedge against benefit liabilities, match the long-term nature of benefit expenses, and more. COLI death benefits can even help the company recover the costs of the plan over the long-term.
While these policies can perform in a similar way to individually-owned life insurance policies, corporate packages can offer several advantages that other policies simply cannot match while promoting growth and limiting risk.
In our next blog post, we will discuss the third benefit of life insurance people haven't thought of.