Regularly it’s far useful to a business or organization to assist an employee purchase life insurance. The policy can be used as an incentive or as a form of deferred compensation. A split-dollar life insurance policy can be beneficial to each the organization and the worker.
What is Split-Dollar Life Insurance
This is an arrangement typically between two parties such as an employer or employee in which they split and share a policy. The policy may be shared and split in several approaches:
-Death Benefits
-Cash values
-Ownership
-Dividends
-Charges
Advantages
Split-dollar arrangement is beneficial to both parties. Listed below are some advantages to the employer:
-The organization can offer low price benefits to it’s employees
-The portion of the premiums paid by the organization for the benefit of the worker can be deducted for tax functions by the employer
-The plan may be designed in order that the organization retains whole flexibility. In different words, the organization can regulate or terminate the arrangement at their choice.
-The arrangement can be used as an incentive to the worker
Advantages to the employee:
-Obtaining life insurance at a lower cost. To gain better coverage at a lower cost, the employees are allowed to split the cost of premiums.
-The employee can shield his/her own family within the occasion of their sudden death.
-When an organization will pay the charges the worker may be capable of reducing their earnings tax liability.
-Can offer for property liquidity in the occasion of the employees dying