Life insurance is important as it protects you financially in case of emergencies and tragedies. Still, not all people have it.
In fact, nearly half of American adults do not have one based on recent surveys.
People overestimate the cost of insurance which is the main reason why it’s foregone by many people.
There are different types of life insurance one can buy and for this post, we’ll focus on Corporate Owned Life Insurance.
Corporate Owned Life Insurance (COLI) covers tax-free death benefits, tax-free withdrawal loans, cash value accumulation, and more.
But what exactly is it? If you own a company and you offer this type of insurance to employees, how can your firm benefit from it?
So, to find the best explanation for what corporate owned life insurance is and more, keep reading!
What is a Corporate Owned Life Insurance?
COLI is an insurance policy taken out by companies for their employees, typically for senior-level executives.
It is also referred to as “dead peasant insurance” because companies took out insurance for their employees without their knowledge or consent.
The “dead peasant insurance” is controversial which resulted in tightening the rules and regulations for this insurance policy in 2006.
With corporate-owned life insurance, the company is paying for the premium which also means they will receive the benefits when an insured employee dies.
Basically, COLI is used in the business world to protect financial interests. The company can borrow or withdraw money against the cash value of the insurance policy and use it as leeway during financial troubles.
COLI can be an individual or group life insurance policy. Keep in mind; this is totally different from the regular group life insurance a company is offering. The difference is the company itself is the beneficiary, not the employee.
Another version of COLI is BOLI (Bank Owned Life Insurance). In this case, the bank or company pays the premium and the beneficiary can have a portion of the benefits if they die.
What are the benefits of offering a corporate-owned insurance policy for your company?
These are the advantages and benefits your company can gain from offering a corporate-owned insurance policy.
Purchasing a COLI also means buying two things – death benefit coverage amount and access to funds.
The corporation can use the death benefit amount to compensate the company in case of loss. Also, the cash value of the insurance can be used as a fund to expand the company’s operation.
That said, the cash value or death benefit amount can become the company’s cash reserve to use during emergencies.
Premiums are paid on a pre-tax basis which allows the company to have more insurance policies. When death benefits are collected from this policy, they’re generally tax-free.
However, corporate-owned insurance can become taxable if the business does not have the proper paperwork.
But then in 2006, laws regarding tax modification for business owned insurance policy changed which eliminated tax-free treatment.
CHEAPER PREMIUM COSTS
If a company buys life insurance, it may obtain favorable pricing on premiums. There are always good deals that await if you’re buying a lot of policies.
Moreover, corporations buying cash value policies may be offered special policies to generate quick cash value.
Still, perform due diligence before deciding to buy life insurance for your employees to ensure you get the best rate.
Can corporations take out life insurance policies on their employees?
A corporation can take out the insurance policy with the consent of its employee. The company can discontinue the insurance policy if the employee stops working.
By offering life insurance, employees are more attracted to stay and work productively for the company.
Life insurance is indeed a valuable work benefit that can motivate employees to work harder. That way, your company’s performance gets better!
Is corporate owned life insurance ethical?
The “dead peasant insurance” controversy arises due to the concept of companies taking out life insurance for their employees without their knowledge. Plus, the insured employee does not get any of the death benefits.
And worst-case, companies are still paying for employees’ insurance despite not working for them. Also, capitalizing on death benefits on people they no longer had a financial interest in is something that sets everyone off.
With this in mind, COLI can be considered unethical. As a result, the Pension Protect Act law was signed into law in 2006.
Companies can benefit from corporate owned life insurance in many ways. For instance, it can be used as a cash reserve to keep the business running after tragedies.
However, the issue of it being unethical is something that should be addressed. Taking out life insurance without the employee’s knowledge violates respect. And most importantly, not giving even a portion of benefits to the insured employee is unfair too.
But rules have been modified. So, you better look into it to ensure all is fair for you and your employees!
CBD is also known as cannabidiol, it is one of the 2 main active ingredients in Marijuana and this is what has led it to having such a negative stigma circulating around it. As it is an ingredient in marijuana, before marijuana was legal and had a negative reputation, CBD was also stuck with this reputation.
The stigma about CBD however is starting to vanish as more people are beginning to realize how good it is for you. The media now focuses on CBD in a more positive light too, highlighting how great it can be, there are more CBD products now than ever before from CBD vape liquid that can help you to relax to CBD muscle balm that soothes painful muscles after a workout.
The most popular CBD product is edibles, if you want to try our favorite CBD product that has been life-changing then you can buy CBD gummies here. They have been shown to improve quality of life as they are so great at helping you to relax and they’re also great for easing symptoms of anxiety and depression. Although the stigma about CBD is almost broken there are still some myths floating around about CBD and we’re going to debunk them.
Does CBD get you high?
Due to its association with marijuana, this is one of the most common myths about CBD. The other active ingredient in marijuana is THC, this is the ingredient that has a psychoactive effect. CBD products don’t contain any THC which means these products give you the calming effect of marijuana without resulting in euphoria or the feeling of being high. CBD is becoming more commonly used by the day, one of the newest uses of CBD is that it is added to skin care products as it can help to clear up your skin.
Does it negatively affect your health?
Again, this myth comes from an association with marijuana. Whilst thousands of people find that marijuana is a great help for their mental health, a small minority of people have found that it can actually have a negative impact. More research is needed, but there are links between smoking too much weed and anxiety, paranoia, and in extreme cases schizophrenia. Many people believe that this is also the case with CBD when in reality it has lots of proven health benefits, just some of the many uses include relief from chemotherapy which is a fantastic release for cancer patients, it has anti-inflammatory effects which can help to relieve pain and it has a great calming effect. There is little research to show that it has any negative effects on your health.
Can you get addicted to it?
This is a big concern among many people who are considering using CBD. This is again caused by the panic people feel when they realize that CBD is from the same plant as marijuana, but the compounds that make up CBD are very different from the compounds that make up THC. However, CBD is not addictive and there has been no reported cases anywhere of becoming addicted to it. In addition to this, there have been lots of medical studies and none have highlighted substance abuse issues.
Is it legal?
This is where it gets slightly more complicated and is why we haven’t fully broken the stigma. In many countries, CBD is completely legal, but in other countries, we think it is down to lawmakers having a lack of information, CBD is not legal. This makes it harder to completely break the stigma. However, in these countries where CBD is not legalized, it is also not a criminal offense to be found with it like it would be with any other drugs. There are no harsh punishments associated with CBD. It is legal in most western countries as the benefits of it has been recognized and over the last decade, more countries are starting to relax their rules around it too. It is projected that over the next few decades it will be legal everywhere, this will be the only way to fully break the stigma.