Split Dollar Life Insurance
Definition of "Split dollar life insurance"
Policy in which premiums, ownership rights, and death proceeds are split between an employer and an employee, or between a parent and a child. The employer pays the part of each year's premium that at least equals the increase in the cash value. The employee may pay the remainder of the premium, or the employer may pay the entire premium. When the increase in cash value equals or exceeds the yearly premium, the employer pays the entire premium. If the employee dies while in the service of the employer, a beneficiary chosen by the employee receives the difference between the face value and the amount paid to the employer (the cash value or the total of all premiums paid by the employer- whichever is greater). Thus, during employment, the employee's share of the death benefit decreases. If the employee leaves the employer, the latter has the option of surrendering the policy in exchange for return of all premiums, or selling the policy to the employee for the amount of its cash value. There are two types of split dollar life insurance policies: Endorsement-the employer owns all policy privileges; the employee's only rights are to choose beneficiaries and to select the manner in which the death benefit is paid. Collateral-the employee owns the policy. The employer's contributions toward the premiums are viewed as a series of interest-free loans, which equal the yearly increase in the cash value of the policy. The employee assigns the policy to the employer as collateral for these loans. When the employee dies, the loans are paid from the face value of the policy. Any remaining proceeds are paid to the beneficiary.
Popular Insurance Terms
Standard Commercial Property Floater form covering death or damage to livestock as the result of insured perils such as fire, lightning, explosion, smoke, wind, hail, aircraft, earth quake, ...
Insurance programs that combine finite risk insurance, reinsurance, and traditional insurance as an alternative to self insurance. These programs are long-term in duration. The objective is ...
Form that provides coverage for a business whose inventory has fluctuating values during the year. The amount of insurance coverage is adjusted monthly, quarterly, or annually to reflect ...
Subsidence is a term used in geology, engineering and surveying to denote the motion of a surface (usually, the earth\'s surface) downwards relative to a datum such as sea-level. In ...
Amount, not in excess of $10,000 per year, given to each of an unlimited number of donees free of federal estate tax and gift tax. Each individual can give up to $10,000 to any one donee, ...
Policy under which the insurer will pay the actual cash value of the property at the time the property was damaged or destroyed provided the loss falls within the limitations of the policy. ...
Recording and presentation of financial statements, such as the annual statement, by the insurance company. Financial reporting statements are used by the State Insurance Commissioner in ...
Effective proprietor of a business. Under the tax reform act of 1986, a uniform accrual rule prevents a qualified pension plan from being weighted in favor of the substantial owner of the ...
Bodily injury liability and property damage liability expressed as a single sum of coverage. ...
Have a question or comment?
We're here to help.