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BOLI is bank owned life insurance where the bank is owner, premium payer and beneficiary of the policies.
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Bank Owned Life Insurance is widely accepted in the banking community as a sound financial strategy. In fact, the OCC and the OTS have stated that when properly used, BOLI transactions are consistent with overall safety and soundness issues governing banks.
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Most banks have found that a properly constructed BOLI program can provide after tax returns of 200 to 300 basis points higher than traditional bank investments with the same risk.
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A properly structured BOLI plan can also achieve a net ROA in excess of 200 bps year after year. This is possible because the BOLI cash value grows tax deferred and death benefits are tax-free. If properly implemented there is no loss of deductible funding costs as with municipal bonds.



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