Death Benefit Only Life Insurance Plan

What Does Death Benefit Only Life Insurance Plan Mean?

As the name suggests, death benefit only life insurance plans (DBO plans) provide a death benefit to the beneficiaries of a current employee in the event of their death.

Insuranceopedia Explains Death Benefit Only Life Insurance Plan

Companies often purchase death benefit only (DBO) life insurance plans for their employees, particularly for executives or officers. In this arrangement, the company pays the premium on behalf of the employee. Since premium amounts depend on the employee’s age and coverage level, workers who want supplemental personal protection can see what rates they’d likely pay by checking the average cost of life insurance. When the employee passes away, the company disburses the benefits to the employee’s designated beneficiaries. The amount received is considered taxable income for the beneficiaries, while it is treated as an ordinary business expense for the employer. Executives who rely on a DBO plan sometimes carry a separate individual policy with one of the best life insurance companies because coverage under a DBO arrangement ends when the employment relationship does.

Some benefits of the DBO insurance plan include simplified ERISA reporting and streamlined plan administration.