BOLI is Bank Owned Life Insurance that insures the lives of key employees in the bank
Banks acquire BOLI to finance the benefit obligations they have for employees, such as health insurance and pensions. BOLI is a favored bank funding strategy because of its unique tax attributes. The cash value of the policies grows on a tax-free basis if the policies are held until mortality, and the death benefit is received income tax free. The tax-free cash value growth can provide a very favorable effect to the corporate income statement.
BOLI purchases can be of the general account or separate account type. A general account BOLI policy has a fixed rate of return that is tied to the overall return of the insurance company's investment portfolio. The bank owning a general account policy is a general creditor of the issuing insurance company. A separate account policy is exempt from the claims of the issuing insurance company and generally provides for a more variable return which may be supported by a bond portfolio.
Variable life insurance products are long-term investments and may not be suitable for all investors. An investment in variable life insurance is subject to fluctuating values of the underlying investment options and entails risk, including the loss of principal. The performance of your account will vary and you may receive more or less than the amount invested.