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
Funds paid by an insurance company associated with the normal costs of doing business other than the costs of claims payments. ...
Act that makes the liability cost for cleanup joint and several. Even if a party is only partially responsible for losses inflicted, that party may be liable for the payment of the total ...
Management philosophy developed by W. Edwards Deming, the thesis of which is the continuous improvement in quality through research in customer satisfaction and the empowerment of ...
Authority of states to tax the insurance companies they regulate. States levy income taxes, real and personal property taxes, and special levies, the most important of which is a premium ...
Crime against the state for which an officer of the state can bring legal action. Society is harmed by an individual breaking the laws of the state. Usually there is no statue of ...
Insurance for which premiums are charged according to the size of the face amount of the policy, so that the greater the face amount, the lower the cost per $1000 unit of insurance. ...
Securities that derive their value from other financial instruments that are used by the insurance company to hedge its bets on which direction the market is moving. For example, cattle ...
Same as term Occurrence Basis: coverage, in liability insurance, for harm suffered by others because of events occurring while a policy is in force, regardless of when a claim is actually ...
transfer of money from or an employer-sponsored pension or other qualified plan into an INDIVIDUAL RETIREMENT ACCOUNT (IRA) with out paying tax on the distribution. transfer of money from ...
Have a question or comment?
We're here to help.