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All About COLI: Corporate Owned Life Insurance Coverage
All About COLI: Corporate Owned Life Insurance Coverage
Summary
Company Owned Life Insurance is really an unique insurance, which is dependent on the lives from the employees or a specific Corporation, the employer, and also the payment benefits received by the Corporation.
The Corporate-owned Life Insurance (COLI) came into existence using the buy from the staff and executives of the individual business in protecting the fiscal price in the occasion of dying of nuclear employees if resulted in unexpected death, or to meet the obligations of the corporation in the redemption of stock consequent upon the owner's death. This type of insurance is also termed as 'key insurance'.
Abusive Use of the Plan in the Past
To be able to gain tax sops, this facility was misused as soon as, for non-key employees. Once, Corporate Owned Life Insurance coverage was utilized for masses of non-key workers in order to get tax benefits. This practice is titled 'dead peasant insurance' or 'janitor insurance'. With the setting up of limits on this practice in 2004 by the Congress, Company Owned Life Insurance is circumscribed to a number of senior executives from the company.
Before Existence of COLI
Considering the scenario prior to the existence of such an insurance coverage policy, the business was the major loser in instances of exit of the employees and in the occasion of death of a top official. Such fluid situations prompted for immediate recruitment which, obviously, is hard to assimilate in the event of the business not being insulated in such adverse cases.
In a Nutshell
In the event of dying of an employee, his/her family is heavily compensated based on the level from the employee. The insurance company still is not the loser after paying hefty compensations, and the employer shares the benefits along using the insurance company who are actually the protagonists of this high drama, and moreover such compensations are quite rare.
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