Why Do Banks Own Cash-Value Life Insurance? BOLI

[@isajthereable]

I had to step away from the live stream, my apologies. Thank you for answering my question. Bruce, that was a very thoughtful answer. I appreciate it. Rachel, thank you for sharing your ideas on retirement. You have really helped me to rethink some of the beliefs that I held just a couple of years ago, and I'm so much better off for it!

[@TheMoneyAdvantage]

You are very welcome! Glad to hear that!

[@EthanLemkeGP]

The analogy of a life insurance company providing life insurance and investing your cash value vs you signing up for term life insurance and investing your own money is interesting. It would be cool to see a list of pros/cons as well as the math of you managing your money in something like a Roth IRA vs the insurance company managing your money. E.g. what would the restrictions be for accessing that money in each "setup"? How does the insurance company's investment strategies compare to a conservative, set it and forget it DIY portfolio (i.e. basic 3-fund retirement portfolio)? Etc..

[@TheMoneyAdvantage]

Ethan, Thank you for watching! The first thing to remember is that life insurance is not an investment but an emergency/opportunity fund, or a place to store cash in between deals. Second, your specific question is too individualized to discuss in general because risk tolerance and time frame would play an important part. If you would like to discuss the pros and cons of this concept, please book an appointment here: themoneyadvantage.com/calendar

[@kriskris5989]

What kind of insurance are BOLI products?I read somewhere that they are not regular Whole life policies ,neither are they IUL’s..they are MEC’s and the breakeven point is Year 1 unlike the whole life policies we get which could take anywhere from year 5-15 depending on how the policy is deaigned.

[@TheMoneyAdvantage]

Kris, Yes, BOLI life insurance is different because banks have legal requirements for liquidity that an individual does not. The life insurance industry has designed products only available to them. We have had several conversations with people who specialize in selling these products, and they are unique. The main point is that banks are using the stability of life insurance companies as part of their tier 1 assets. I think it would be more accurate to say that in "most cases," BOLI is a MEC, but not always. Banks do not care about that as it is for reserves, and they plan on waiting for the death benefit or waiting until the executive the policy is underwritten turns 65 so they can later access the cash value at that time. So even for the banks, it's a longer-term play, and they are thinking long-range.

[@kriskris5989]

@@TheMoneyAdvantage I Agree..i am also moving my excess reserves beyond a 6 month emergency fund to Whole life policies,using life insurance as an asset protection itself is worth it for me since I am into Real estate and I don’t want frivolous law suits drain money from my bank accounts..If I loose every asset of mine,I can be sure of the safety of my cashvalue because I have policies with Mutual life insurance companies..

[@juliansanchezbiz]

So do the banks get Whole Life or IUL's ?

[@TheMoneyAdvantage]

BOLI is a life insurance product designed for banks to meet their reserve requirements that are not available to individuals.

[@indigenouskings]

I heard it was a Single Premium Universal Life Insurance policy.

[@TheMoneyAdvantage]

It can be either a single premium or a series of annual premiums. I have never heard of any BOLI product called Universal Life, as the products are different and designed to meet banks' liquidity requirements not the needs of individuals.

[@indigenouskings]

@@TheMoneyAdvantage ok question. Do you all have any video topics on Bank securitization of promissory notes. And doesn't the Life insurance agency sell your policies the same way banks do fractional banking with mortgages and loans?

[@TheMoneyAdvantage]

@@indigenouskings We have discussed banks securing a loan using life insurance, but I am not sure which particular episodes. What do you mean by "sell policies the same way banks do with mortgages and loans?"

[@Savannah-ed4rv]

How do banks insure individuals when they don't have their health information??

[@TheMoneyAdvantage]

They are not ensuring random people, but their top executives.

[@robmartin217]

Banks fall like Dominos....Insurance companies do not....fractional reserve vs dollar for dollar reserve...

[@TheMoneyAdvantage]

Thank you for watching!

[@mcartere8264]

What happens to value of your life insurance policy in a Over night monetary reset?

[@TheMoneyAdvantage]

Thank you for watching! What happens to the value of everything during a monetary reset? Multiple life insurance companies have existed since before the Civil War, and our currency has changed multiple times, yet all these companies have kept right on going, never skipping a dividend payment.

[@robmartin217]

"Mortgage" Life Insurance.....

[@TheMoneyAdvantage]

Thank you for watching!

[@Savannah-ed4rv]

Very convenient that corporations and banks own life insurance and covid had come into existence. Talk about a huge payday.

[@TheMoneyAdvantage]

BOLI has been around long before C, and they are not ensuring random people, but their top executives.

[@indigenouskings]

​@@TheMoneyAdvantageYes, that is correct. But its my understanding accounting to the OCC, banks can purchase BOLI policies on borrowers. So imagine that the loan is paid for once you give the bank a promissory note.

[@TheMoneyAdvantage]

​@@indigenouskings Sure, but the most common use is on their executives.