Why BOLI is such an attractive investment
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Cash values accrue tax-deferred.
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Death benefits are tax-free.
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ROA typically in excess of 200 bps net after tax.
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ROE typically in excess of 30%.
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Most BOLI carriers are rated AA and above by Standard & Poors. |
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The insurance company must pay a competitive rate of interest or you
can switch to another carrier without a taxable event occurring.
(1035 exchange) |
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You can surrender on demand without any diminution of principal. |
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The insurance company cannot refund your money unless you request
a surrender. |
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Premium tax cost is amortized. |
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DAC tax cost is amortized. |
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Tax-free yields are used to offset benefit costs. |
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There is no loss of deductible funding costs when carrying BOLI |
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Yields are variable. Duration can be as short as 1 year or as long as 8-10 years, at your option. |
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BOLI is always valued at book value. No market volatility is present,
even when shocked up 300 bps or down 300 bps. |
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Income enjoys “non-interest” or “other” classification. |
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Maturity value is 2-3 times its asset value |
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Transfers risk to the insurance company
- Credit risk of underlying investments
- Price risk of underlying investments
- Interest rate risk
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