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Company-Owned Life Insurance
Many large companies have insured the lives of a large
number of their employees. There are large tax and
accounting benefits to such transactions, many of which
have recently been reduced by Congress or financial
accounting principle-setting bodies.
There are often severe tax penalties for terminating
such plans prior to employees dying. At the same time,
premiums and/or policy loan interest will exceed death
benefits received, making continued holding of such
policies uneconomic. Often polices are not performing
in accordance with original projections. Finally, because
of the long-term nature of such investments, the employees
who were involved with the purchase and original administration
of such policies are often no longer active employees.
Companies generally turn to their insurance brokers
for assistance in such situations. At times, however,
it is advisable to have an analysis performed by someone
who is not a broker, does not have an interest in selling
additional insurance and who is impartial in analysis.
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