Bank Owned Life Insurance (BOLI) | What Is It

In fact, for many banks, life insurance is the largest asset class they have in their books. The reality is banks rely on life insurance companies to provide their stability for them. Why is that? Well, because while over 560 banks failed in the great recession of 2008 and 9, only one participating mutually held life insurance company has failed since the 1840s. That's over 170 years. So the question I pose to you is this, if the biggest and best financial institutions on the planet are leaning on life insurance companies to build their financial foundations, Why aren't most people? Hey, what's going on Cashflow Hackers? It's Chris with Life180 and today we're going to be talking about bank-owned life insurance and what is it? Now, before I get into exactly what bank-owned life insurance is, I want to ask you a question. Where do you store your money in capital? Now, if you're like most Americans, you save your money in a bank. However, do you know where banks are keeping their capital? A surprising fact to most people is that banks are holding a significant portion of their capital inside of bank-owned life insurance, or what's also known as BOLI for short. Now, Barry James Dyck, who I've interviewed on this channel several times, discovered in 2008 that banks were, in fact, the largest purchasers of whole life insurance in the United States, with over $96 billion worth. That was back in 08. Other statistics show that that number has almost doubled in the more than decade since. Now that's more than 11% of their aggregate equity capital. So what exactly is BOLI? BOLI is insurance purchased by the banks on key employees like executives, VPs, or anyone else that they deem essential in the success of the bank. Why do banks want BOLI? At the end of the day, there are many reasons that a bank would want to own bank-owned life insurance. Now, it can be used to supplement 401k plans. It can create defined benefit plans. But perhaps the most important component of bank-owned life insurance for banks is that all the capital held inside of the bank-owned life insurance policy counts towards the bank's requirements of their capital reserves in the same way that gold and actual cash does. Now, to understand why this is so important, you need to understand how a bank operates. You may or may not know this, but when you make a deposit to a bank, that deposit is actually a liability to that bank. Now, why is it a liability? Because they need to provide you some sort of return on that money, even if it's a minimal return. However, due to the fractional reserve banking system, the bank is able to leverage your money. So, for example, every $100 you have on deposit inside of a bank, the bank is able to lend out $1,000 against that value of your deposit. Overall, whatever the bank has lent out, it needs to have 10% liquid reserves on hand. The FDIC calls this tier one capital. Now in 2004, the general accounting office discovered that there are over 467 banks that have more than 25% of their tier one capital inside of bank owned life insurance. In 2004, the general accounting office discovered that there 467 banks that have more than 25% of their tier one capital inside of bank-owned life insurance. They keep such a high percentage of their reserves or tier one capital in life insurance because life insurance offers what no other asset can, tax advantages and guaranteed growth. Essentially, they are doing the complete opposite with their own money inside of the bank Now, this is one of my greatest passion points in what I do. sharing with people that they can do the same thing that the banks do with their money. Let's look at it this way. We're being taught to do the opposite because there is less profit for the banks when you do what they do. Let's look at it this way. We're being taught to do the opposite of what banks do because there's less profit for the banks when you do what they do. If you were to set up your own whole life policy as a tier one asset in your life, It would put you in more control of your finances and effectively reduce your need for the bank, reducing their profitability. It's no wonder there aren't any signs of the bank or investment banks to get you to sign up for it. In my opinion, banks are the greatest hypocrites in the financial industry. They sell products like savings accounts, checking accounts, mortgages, and auto loans. However, they don't sell the one product that they purchase to provide the bank with more stability during uncertain times than any other product, which is whole life insurance In fact, for many banks, life insurance is the largest asset class they have in their books. The reality is, banks rely on life insurance companies to provide their stability for them. Why is that? Well, because while over 560 banks failed in the Great Recession of 2008 and 2009, only one participating mutually held life insurance company has failed since the 1840s. That's over 170 years So the question I pose to you is this. If the biggest and best financial institutions on the planet are leaning on life insurance companies to build their financial foundations, why aren't most people? Well, I think there are potentially a couple of reasons. The first one, which I've already alluded to, is that I believe there's a big conflict of interest. I don't think the banks or investment companies want you to know about this because if you found out about it, it would reduce their profitability. And second, not that many people know how to do this. As I mentioned to you earlier, you can't just get any run-of-the-mill whole life insurance policy to perform this function. There's only a... Very small percentage of financial professionals that know how to design a whole life insurance policy properly to be able to achieve this goal. If you want to learn how you can transition away from the bank and start doing what the banks do in your own life, you need to connect with somebody who can help you design a whole life policy the right way. Now, this is one of the main focuses at Life 180, to help people set these policies up to take control of the banking function in their own life and regain control in their own life, ultimately simplifying the financial confusion that is being taught in the marketplace right now. You can start playing the money game using the rules that banks and large corporations, also known as Coley, also that the wealthy use. Will Rogers once said this, The biggest problem in America isn't so much what people don't know. The problem is what people think they know that just ain't so. So I invite you that if you are curious about what a banking policy could look like in your life, what problems it could solve, how could it get you to where you want to get financially faster, then I encourage you to go to the link in the description below and set up a free consultation. It doesn't need to be us, but I do believe you need to speak with somebody to take back the banking function in your life as soon as possible. If you haven't already, I encourage you to keep the journey going and subscribe to this channel now. Make sure you hit the bell, that way you're notified every single time I launch a new video because I'm literally releasing a video almost every single day. I wish you the best of luck on your path to financial freedom. We are here if you need anything at all. Have a blessed and inspirational day, and we'll see you on the next video. Take care.