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Term Life Insurance |
Split Dollar Life Insurance
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Split dollar life insurance was built primarily with the family business in mind. Picture if you will a couple that strikes out on their own and start a business. They send their child to college who, in turn, graduates with a business degree. The child returns home and it is mutually decided that he or she will take part in the family business. After a few years of dedication and hard work the parents decide it is time to retire and allow their grown child to assume control of the business.
This seems to be a golden opportunity at first glance. On second glance something is amiss, namely that the new owner cannot pay the premiums on the existing life insurance policies. This is exactly why split dollar life insurance was created. The gap in coverage due to the differences in the ages and policies causes a costly discrepancy. Split dollar life insurance allows the new business owner to spread the costly premiums among all the policyholders in his company. Of course this also means that the benefits are also spread across those assuming the burden but this can be a great way to get insurance on a shoestring budget. This opens the door for many employees to take advantage of their company’s life insurance policies. This can also allow older employees who wouldn't normally be eligible for coverage a way in. The split dollar life insurance policy also allows all who participate to have access to more insurance coverage than they would have otherwise been eligible for. Though the benefits at the time of payout will be split between the company and the beneficiaries at the rate agreed upon at the time of the policy signing. It is in this way that both sides of the policy can receive benefits from the one policy. The true beauty of the split dollar life insurance model is the ease at which buying and selling arrangements can be made on the business' behalf. It also opens the door for the procurement of other life insurance products that meet specific financial needs. Although the premiums under a split dollar life insurance policy are not tax deductible the employer can receive a tax deduction against any bonuses paid out to offset premium costs. As you can see there are many advantages for both employer and employee under the split dollar life insurance policy model. Additional Resources: Here are some resources that will provide you with additional life insurance information:
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