How Does COLI Work

With COLI, your institution purchases life insurance on a select group of consenting employees. Together, the insurance on this group acts as a proxy for the benefit obligations that will be paid to all of your employees. Your institution pays the premiums and is the owner and the beneficiary of the policies. This insurance does not have any negative ramifications for your employees. No physical examinations or health history is required. Furthermore, the insurance will not impact the employee’s ability to secure insurance to cover his or her own needs.

A major portion of the premium dollars that the policyholder pays is used to establish cash value in a Variable Life Insurance policy. The cash value is an asset of the policyholder and the growth in the cash value asset is tax deferred. Insurance and expense related charges are removed from the cash value on a monthly basis. The insurance company places the cash value assets in one or more professionally managed investment accounts with investment guidelines that are consistent with the institution’s investment goals.