Definition. Bank-owned life insurance basically refers to the entire permanent or whole life insurance policies that financial institutions buy in order to cover the life of a senior manager or employee and minimize the financial risk of the life of an executive in the firm. In other words, a bank-owned life policy basically provides a safety net for the future, especially for the life of a senior management.
What makes a life insurance policy “bank-owned” is that in the event of the death of the insured person or the death of the insured organization, the insurer pays the beneficiaries the sum insured as an amount of money at the time of death of the insured person. In general, banks buy these policies from financial institutions that have an interest in their long-term existence as an insurer and in ensuring that the insured person’s life is covered. The insurance company then distributes the payment of the death benefit among the beneficiaries.
Financial institutions acquire bank-owned policies in order to ensure that there is an insurer willing to purchase these policies, which are very useful when the insured person decides to transfer to a new firm, as he would then be covered by an insurance policy that was acquired by the firm from the insurer. A lot of financial institutions purchase these policies from different insurance companies, which have an interest in making sure that the insured person remains covered. Many insurance companies also acquire these policies from a company that does not want to be the insurer for their own financial assets because they want to retain control over their investment portfolio.
A lot of financial institutions also buy bank-owned policies to protect their existing clients. These policies can also be bought by individual clients if they are looking for a policy that is suitable to their lifestyle and circumstances. When buying such policies, it is important to remember that some policies are cheaper than the ones purchased by financial institutions. Therefore, people who are looking for insurance should be aware of the difference between these policies and those purchased by financial institutions.
Bank owned policies are generally issued by the insurer through a process that is known as reinsurance. This process involves a group of financial institutions that buy the entire life policies of senior managers or executives and gives them a lump sum payment, while keeping the premiums of the policy in an account. until they sell the policy and pay the premiums back.
These life policies can be of different types: whole life, variable life, universal life and variable universal life. They are all provided by the same financial institution in a number of ways, including the purchase of policies, the purchasing of them from multiple financial institutions and the issuance of the same policies to different beneficiaries under different names. Another way is to give the same policy to the same beneficiary, again under a different name. In some cases, financial institutions issue a specific policy for an entire firm or organization under the name of a particular department of the firm.
Bank-owned policies can also be bought directly from financial institutions. There are various firms that offer this option. One such firm is the New York Life Insurance Company. The other is Aetna Life Insurance Company. These firms offer policies through brokers who act as agents between financial institutions and customers.
These financial institutions can also buy bank-owned policies directly from individual clients. The policies are typically sold to the public through the Internet. However, in order to make sure that a client has purchased a policy from a reputable insurer, the client should ensure that the broker that acts as an agent for the insurer is accredited with an agency that performs insurance audits.