Bank Owned Life Insurance

Many of our clients choose to use Bank Owned Life Insurance or BOLI, to informally fund recruiting and retention programs.  Others use it to help offset the cost of existing benefit plans such as group medical insurance or employer 401k contributions. 

Types of BOLI

There are three basic types of BOLI policies, General Account, Separate Account, and Hybrid Separate Account. With General Account BOLI the bank's premium dollars are invested in the insurance company's investment portfolio. The insurance company credits an interest rate declared in advance and carries the investment risk. 

With Separate Account BOLI, the bank directs its premium dollars into a variety of separate account divisions with different underlying investment portfolios. The bank assumes the investment risk of the underlying securities.

 With Hybrid Separate Account BOLI, the bank has a choice of separate account portfolios and the insurance company protects the bank from market losses guaranteeing a minimum crediting rate*. Depending on your bank's needs, the selection of the right type of BOLI product is an important decision. 



According to the FDIC in FIL 127-2004: "An institution should review the characteristics of the various insurance products available, understand the products it is considering purchasing, and select those with the characteristics that best match the institution's objectives, needs, and risk tolerance."