Corporate-owned life insurance
Corporate Owned Life Insurance (COLI ) refers to a life insurance where the corporate owns the life insurance on employee lives. In other words, the insurance is on the lives of the employees but owners are their employers. They are generally used to motivate employees or reward highly skilled employees. They are used mostly for employees at the executive and managerial level.
At the outset, it will appear as though it is used only to motivate skilled employees. But it is actually used to cover the financial risk of recruiting and training employees in key positions. This insurance is often called as key man or key person insurance.
Since there are several tax advantages in this policy, corporations started using this policy also for lower-level employees. When these employees die, their companies are the owner for the benefits. The family may get a part or no share from these benefits.
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