A split dollar life insurance policy is not a type of insurance, but a way of paying for and collecting on life insurance so that it benefits two parties, usually an employer and employee. The policy is taken out on the employee as a benefit, reward, and/or way to retain them. Premiums and benefits are "split" by the two parties.
The way the split dollar life insurance policy works involves how premiums are paid, who owns the policy, and how to divide the death proceeds, cash values and/or dividends. There are two popular ways to structure split dollar life insurance. Both designate the employee as the Insured.
1) Endorsement. The employer is the owner of the policy and endorses it so that some or all of the death benefit will go to the choice of beneficiary of the Insured, when the insured employee dies.
2) Collateral Assignment. The employee owns the policy and collaterally assigns some of the death benefit to the employer as reimbursement for premiums paid.
To find out the best way to structure split dollar life insurance for business or family purposes, it is important to have correct financial and legal advice. Call a reputable life insurance agent or agency to start working on your split dollar life insurance policy.
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The way the split dollar life insurance policy works involves how premiums are paid, who owns the policy, and how to divide the death proceeds, cash values and/or dividends. There are two popular ways to structure split dollar life insurance. Both designate the employee as the Insured.
1) Endorsement. The employer is the owner of the policy and endorses it so that some or all of the death benefit will go to the choice of beneficiary of the Insured, when the insured employee dies.
2) Collateral Assignment. The employee owns the policy and collaterally assigns some of the death benefit to the employer as reimbursement for premiums paid.
To find out the best way to structure split dollar life insurance for business or family purposes, it is important to have correct financial and legal advice. Call a reputable life insurance agent or agency to start working on your split dollar life insurance policy.