Split Dollar Life Insurance—How You Can Reap The Benefits!

In a recent blog post, I discussed the possibilities of offering life and disability insurance with a salaried bonus to selected employees. While it is called “Executive Bonus”, a selected employee does not have to be an owner, part of the management team, or fall into any particular employee category within a company. It’s a real win-win for both the employee and company and can improve productivity and morale.

Split dollar life and certain disability insurance plans can take these benefits to a whole new level. It can be part of an executive bonus package, but executive bonus is largely owned by the employee. Split dollar is a different type of arrangement.

First off, there must be a strong desire by both the company and employee for the need to own insurance. The insurance policy needs to benefit both the company and the employee and be set up for a specific period of time, such as 10-20 years, or by using a target age, such as age 65. The arrangement needs to be agreeable to both the employee and company, which will require careful negotiation and consideration. The amount of insurance coverage needs to be established to the satisfaction of both parties.

When split dollar life or disability insurance is done right, it is well worth it!

I want to emphasize here that while this is a very valuable option, it is an agreement between the employer/company and the employee and not a simple “perk,” such as an annual cash bonus.

Split dollar can be divided in many ways and there is no set arrangement. Each situation is unique. Let’s say the amount of coverage is agreed upon, and the company wants to retain for the next ten years all the cash value of the life insurance policy that covers that employee. The employee would have the rights to the death benefit. That is a type of a possible “split.” This brief example is only one of many possibilities to be considered carefully to create the best all-around options.

Ultimately, the agreement needs to establish how much is to be paid through the insurance coverage by the employer and employee, i.e., how the costs and values/benefits are allocated.

Great care is necessary to help design this type of coverage. I have worked with companies and employees to set up appropriate arrangements that benefit both employer and employee.

I understand the advantages of specific options, and will work with your attorney, accountant, or other financial advisor to help establish the appropriate arrangement required.

Why should you implement a split-dollar arrangement? Although the initial set up may seem complex, the benefits will be significant. Together we can bring this benefit to you and your company.

Please contact me soon so we can start putting this to work for you!