Split-dollar Life Insurance

Published: | Updated: August 14, 2016

Definition - What does Split-dollar Life Insurance mean?

Split-dollar life insurance is a type of life insurance in which a company and an employee of the company purchase a life insurance policy together. Generally, the employer is listed as the "owner of the policy." However, the employer and the employee share both the premium costs and the benefits of the policy.

Insuranceopedia explains Split-dollar Life Insurance

Split-dollar life insurance policies are common for a number of reasons. First, they provide a low-cost way for employers to provide benefits to their employees. Second, the death benefits for both parties are usually income tax free. Third, neither party has to carry the full burden of the premium payments. Finally, it is often simpler for an employee to take a life insurance plan from their employer rather than having to scan the market and do significant research on their own to find a good policy.

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