The Advantages of Split-Dollar Life Insurance

This article explains the advantages of split-dollar life insurance agreements. Split-dollar life insurance is a special type of life insurance that is designed to help pay for the costs of a terminal illness. Understanding its advantages is a key piece to making wiser policy and financial decisions.

  1. A split-dollar arrangement is an extremely cost-effective tool that helps an employer to recruit, retain, and reward key employees.
  • The major cost of the plan is the after-tax opportunity cost of the use of the employer’s outlay.
  • The employer will, in most cases, recover the entire amount advanced upon the employee’s death (from the policy’s death proceeds) or termination of the insured’s employment (from the policy’s cash value).
  1. An employer can pick and choose who will be covered, the amounts of coverage, and the terms of the coverage, and vary these elements from employee to employee.
  2. There are virtually no ERISA reporting and disclosure requirements for split-dollar plans because these plans are typically provided only to a select group of top-level employees.
  3. In most types of split-dollar plans, the employer’s outlay is fully secured at all times.
  4. Split-dollar provides a way to guarantee the employee’s insurability. For example, the employer could voluntarily sell the employee the insurance if the employee’s health deteriorates in the future.

This compilation of the 5 key advantages of split-dollar life insurance agreements should be used to help a consumer make a better policy decision.

Learn more about Split-Dollar Life Insurance here.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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