1. 4330 POINTS
    Jerry Vanderzanden, CLU, ChFC
    Co-Founder, Coastal Financial Partners Group, California
    The term came in use since 2006 when new rules were applied to life insurance owned by businesses which subjects the death benefit to income taxation unless the employer takes steps to comply with the special requirements of Section 101(j) to prevent the death from being taxable. There are notice and consent requirements to be given to the insured and an annual IRS filing (form 8925) to meet the special requirements. We find that most employers are unaware, especially of the annual reporting requirement. Tax advisers are often surprised to learn about it as well. Work with an experienced life insurance professional who can help assess the situation for in force policies. For new policies, make sure a professional outlines the special requirements for your situation.
    Answered on June 2, 2013
  2. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    Employer owned life insurance is coverage offered to employees as a benefit of working for that employer. The part that is nontaxable to the employee is $50,000 although the employee may be offered the option to purchase more coverage for himself/herself and his/her faimiles at a reduced cost but with tax implications.
    Answered on June 2, 2013
  3. 616 POINTS
    Robert J Russell - Finalist for Broker of the Year 2015
    Broker Owner, InsuranceAgentsSelling.com, United States (Most States)
    The corporation is either the total or partial beneficiary on the policy, and an employee or group of employees, owner or debtor is listed as the insured(s). Fundamentally, COLI differs from group life insurance policies that are typically offered to most or all of the employees in a company, because this type of insurance is designed to protect the employees and their families and not the company itself. COLI can be structured in many different ways to accomplish many different objectives. One of the most common is to fund certain types of nonqualified plans, such as a split-dollar life insurance policy that allows the company to recoup its premium outlay into the policy by naming itself as the beneficiary for the amount of premium paid, with the remainder going to the employee who is the insured on the policy. Other forms of COLI include key person life insurance that pays the company a death benefit upon the death of a key employee, and buy-sell agreements that fund the buyout of a deceased partner or owner of a business. In many cases, the death benefit is used to buy some or all of the shares of company stock owned by the deceased (such as with a closely-held business). COLI is also frequently used as a means of recovering the cost of funding various types of employee benefits.
    Answered on March 6, 2016
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