Bank Owned Life Insurance policies are institutionally priced, single-premium policies purposefully designed for financial institutions. Three types of BOLI products are generally available in the marketplace today. Understanding the differences among these policy types can help bank decision-makers select the strategy that best aligns with their objectives.

General Account

General Account BOLI is the oldest and most widely used product. When banks invest in a general account product, the deposit becomes part of the general account of the insurance carrier. The insurance company bears all the credit and investment risks.

Although many insurance carriers invest primarily in real estate and bonds, with General Account BOLI, the carrier does not provide specific details on where it is investing the BOLI proceeds. Instead, the carrier offers selected details of its general account holdings. The product has a current crediting rate that can be changed periodically by the carrier, and a guaranteed minimum crediting rate that it must also maintain.

Separate Account

With Separate Account BOLI, the carrier segregates the holdings from its general account into bank-eligible investments managed by established fund managers. The fund managers provide detailed reporting of the assets within the portfolio.

The crediting rate is determined by the carrier using a yield-to-worst ratio. However, there is no guaranteed minimum crediting rate.

Hybrid Account

Just as it sounds, Hybrid Account BOLI combines features of both General and Separate Account BOLI. Hybrid Accounts provide both a current and guaranteed crediting rate of a general account product with the transparency of a separate account product.

Hybrid Account BOLI may allow the policyholder to select investment strategies, while the insurance company guarantees a minimum crediting rate and protects against market losses. Neither a Separate Account nor a Hybrid product is subject to the creditors of the insurance carrier, which provides an additional level of protection to the bank. Hybrid plan availability may vary by state.

BOLI: Strategies to Align with a Bank’s Objectives

Each BOLI structure offers a different combination of crediting approach, asset transparency and risk profile. Understanding the differences among general account, separate account BOLI and hybrid separate account BOLI may help banks evaluate how each structure aligns with their balance sheet objectives, risk tolerance, and long-term benefit funding strategies.

Equipped with an understanding of BOLI options, financial institutions can best choose a strategy to fits their objectives and governance standards.

For a deep dive into Bank Owned Life Insurance (BOLI), we invite you to read An Overview of Bank Owned Life Insurance or get in touch with us at executivebenefitssolutions@onedigital.com.
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Investment advisory services offered through OneDigital Investment Advisors LLC (“ODIA”).  Securities offered through M Holdings Securities, Inc., a registered broker/dealer, member FINRA/SIPC. Insurance products offered by G.W. Financial, LLC (NPN# 9721912). “BoliColi” is a d/b/a of ODIA, M Holdings Securities, Inc., and G.W. Financial, LLC.  M Holdings Securities, Inc. is independently owned and operated. ODIA is independent of and unaffiliated with M Holdings Securities, Inc. and G.W. Financial, LLC. Corporate Advisory and/or Tax services offered by Digital Insurance LLC.

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