Types of BOLI Products

The founder and CEO of Bancorp Services, Seth Koppes is a financial professional who has dedicated his career to advancing the industry. With his expertise in finance and his commitment to finding the best solutions for his clients, Seth Koppes has made Bancorp Services a leading provider of BOLI products.

Banks purchase a type of life insurance policy called Bank-Owned Life Insurance (BOLI) to offset costs and cover liabilities in the event of the death of a key employee or executive. Insurance companies offer three types of BOLI products to banks. These are general accounts, separate accounts, and hybrid accounts.

In a general account product, the bank (the policyholder) makes payments to the insurance carrier’s general account. The insurance carrier can invest the money in diverse asset categories, such as real estate or bonds. The insurance carrier can provide some information about its general account holdings, but is not obligated to provide precise details on how the BOLI contributions are used. General account products are the most common BOLI products.

Under a separate account product, the insurance carrier separates its holdings from its main account and places them in bank-eligible investments. Fund managers are in charge of the investments, and provide comprehensive reporting on the assets in the portfolio. Using a type of ratio called yield-to-worst ratio, the carrier determines the amount of interest that is credited to the policy’s cash value. There is no guaranteed minimum amount of interest.

Hybrid accounts are structured in a manner similar to separate account products, which means the BOLI proceeds are separated from the carrier’s general account and detailed reporting is available. And like general account products, hybrid accounts have a guaranteed minimum amount of interest on the policy’s cash value.

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