Death Benefit Only Life Insurance Plan

What Does Death Benefit Only Life Insurance Plan Mean?

As the name suggests, a death benefit only life insurance plans or DBO plans offer a death benefit to the beneficiaries of a current employee in case of their death.

Insuranceopedia Explains Death Benefit Only Life Insurance Plan

Companies often purchase a death benefit only (DBO) life insurance plan for their employees, especially executives or officers. Upon doing so, they pay the premium on behalf of the employee. When the employee dies, the company pays the benefits to the employee’s designated beneficiaries. The amount paid is treated as a taxable income on the part of the beneficiaries. On the other hand, it is treated as an ordinary business expense on the part of the employer.

Some of the benefits of the DBO insurance plan are that it involves simplified ERISA reporting and plan administration.