Split-dollar Life Insurance

What is split-dollar life insurance?

"Split dollar" is not a single type of policy but a way of paying for life insurance.  More precisely, a split-dollar arrangement is a contract in which a business and an employee agree to share the ownership, cost, and/or proceeds of a life insurance policy.

A split-dollar arrangement is a good way to reward an employee with substantial protection at little or no cost to the employer.

Why use a split-dollar plan?

Benefits for the employer

• The plan can be executed at no cost to the employer: when the policy pays out, the employer recovers its cost from the death benefit or surrender value.
• Such a plan inspires company loyalty in the participating employee.  Sharing a life insurance policy foments a closer association and provides an incentive to remain with the employer.
• No external authorization is needed.  Unlike tax-qualified plans, a split-dollar arrangement entails no constraints on participation.  The company may hand-pick employees whom it sees fit to reward.

Benefits for the employee

• The financial assistance from the company makes a larger amount of life insurance coverage affordable.
• The company may use the policy’s cash value as a retirement plan for the employee.  (see also: Deferred compensation plans)
• The company may transfer ownership to the employee at retirement, thereby bestowing a sizeable asset upon the retiree.

To purchase a split-dollar plan or to have a life insurance advisor walk you through your split-dollar life insurance options, call us today at 1-800-823-4852.