What Is Bank-Owned Life Insurance (BOLI)? Understanding Institutional Wealth Strategies

Why do top banks own billions of dollars of cash-value life insurance, if Dave Ramsey and Suze Orman say it’s such a bad idea?

Today, we’re looking into bank financials at a little-known, highly desirable asset banks use as a Tier 1 Capital Asset to increase their financial strength. We’re talking about bank-owned life insurance, or BOLI.

We’re going to lay to rest the fallacy that this type of insurance is such a terrible investment,  and explain exactly why the most successful financial institutions in the world are pouring billions into it.

So, if you want to fortify your finances and increase your stability through economic turbulence … tune in now to find out about becoming your own banker with the Infinite Banking Concept!

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Quick Takeaways

What you’ll discover:

• Why the smartest money managers in the world are pouring billions into life insurance while financial gurus tell you it’s a bad idea
• The staggering amounts banks actually own – numbers that will make you question everything you’ve been told about life insurance
• What banks did during the 2008 crisis that should change how you think about protecting your wealth
• How to copy what banks do and apply their strategies to your personal finances
• Why banks choose life insurance over other investments when they could put money anywhere

How to become your own bank using the same wealth-building principles as billion-dollar institutions

What Is BOLI?

BOLI stands for Bank Owned Life Insurance, and while it’s widely available knowledge, it’s not widely understood. So why would banks want to own life insurance, and what does it do for those institutions? 

Banks really didn’t own life insurance until about 1994. In large part, banks take life insurance policies out on their key employees. This doesn’t just give the banks an additional place to store and grow capital securely.

The death benefit also provides the banks with a means to train a replacement in the event of that employee’s death. In fact, even the cash value is useful in allowing the banks to prepare for a key employee to retire. This is how banks have “insurable interest” in their employees. 

But banks don’t just take out these policies on their employees, either. Banks have actually started group policies on the bank’s customers who have loans with the bank. This means that if a customer died, the death benefit would pay for any outstanding loans. 

Banks are great at protecting their money. They see the value in having their money over-collateralized in order to protect it. 

If that is something that this institution is doing, why shouldn’t you be doing it in your own life?

Banks didn’t stumble into this strategy by accident – they discovered what wealthy families have known for generations.

How BOLI Works

Boli isn’t some sort of experimental strategy. This is how the smartest money managers in the world protect and grow capital.

Let’s say a bank has a key executive making $200,000 a year. The bank takes out a $1 million life insurance policy on that executive, pays the premiums, and owns the policy.

• Year one: The bank pays a $20,000 premium. Nearly all of it goes into cash value immediately, with full liquidity from day one. That cash value earns a competitive, tax-advantaged return.
• Year five: The cash value has grown significantly. The bank can borrow against it if it needs capital for operations or lending..
• Year ten: The executive retires. The bank still owns a growing asset with even higher cash value and a $1 million death benefit, which supports long-term planning and future expenses.

Or, if the executive passes away, the bank receives the full $1 million death benefit tax-free. This more than covers the costs of finding and training a replacement and compensates for any business disruption.

Meanwhile, throughout this entire time, that cash value has been growing steadily – no market risk, no volatility, just predictable growth that banking regulators actually encourage.

That’s why banks love this strategy: it solves multiple problems while building wealth in the safest way possible. 

What About COLI?

Like bank-owned life insurance, there is also corporate-owned life insurance, or COLI. The idea and usage of this type of life insurance is the same. Companies benefit from having growth and liquidity in a life insurance policy, as well as the death benefit. 

Corporations like Walmart, Disney, Procter & Gamble, and many others rely on life insurance strategies. 

So if life insurance is such a “bad investment” as some financial talking heads would suggest, then why are banks and major corporations relying so heavily on life insurance in their financial strategies? Clearly, there must be some merit to it.

Why BOLI Is So Effective

Predictable Asset with Regulatory Approval

Tier 1 capital is the core of a bank’s capital that is held in reserves. It is also used to fund some of the bank’s business. This kind of capital must be safe and liquid. In fact, regulators require that banks have a certain amount of tier 1 capital available. This determines the strength of a bank, and that capital is useful for funding any losses the bank might have.

Banking regulators actively encourage BOLI, which should tell you something. While they constantly question other investments as too risky, life insurance cash value gets the green light as safe, reliable capital.

High Cash Value Accumulation and Stability

In other words, tier 1 capital, like bank-owned life insurance, is directly related to the strength and stability of a bank. So if banks are using such a large portion of life insurance to provide a foundation for their institution, that same logic can apply on an individual level. 

It’s capital that is safe, liquid, and has growth that’s not correlated to the stock market, after all.

Banks need assets they can count on, and BOLI delivers exactly that – steady, predictable accumulation without market drama.

How Much Do Banks Actually Own?

It might surprise you to know just how much life insurance banks have in their financial portfolios.

Here are the most current numbers available:

Industry-wide totals:

• $205.7 billion in total BOLI cash value across all banks as of September 30, 2024
• 3,053 banks nationwide reported BOLI holdings on their regulatory filings
• 80% of banks with assets between $500 million and $10 billion own BOLI

Source: BoliColi.com, citing S&P Global Market Intelligence

And while the list above shares some of the more commonly known banks, there are tens of thousands of smaller regional banks with large cash values. 

Banks are in the business of making money, and yet they have billions of dollars tucked away in cash value life insurance rather than investing it.

What Banks Did During the Financial Crisis

It’s interesting that in 2008 and 2009, during the biggest financial crisis in our recent history, banks were increasing their life insurance holdings, not decreasing.

When we look at banking, if they say that during times of crisis and challenge, we’re increasing this asset to hold more cash value than before, that should tell us that they are using this as a predictor of financial strength and stability. And we can do the same in our own lives.

When the financial world was crumbling around them, banks doubled down on life insurance.

 Is BOLI a good investment? The banks answered that question with their wallets – they bought more, not less.

What Individuals Can Learn from BOLI

Model the successful few and watch what the successful are doing. Success doesn’t necessarily just mean successful individuals; it can also mean successful entities, organizations, or industries as a whole.

Banks aren’t emotional about money – they’re strategic. They don’t chase the latest investment fad or panic during market downturns. They choose assets based on safety, liquidity, and predictable growth.

That’s exactly what you get with a properly designed whole life insurance policy:

Safety: Your cash value is guaranteed to grow, regardless of what happens in the stock market.

Liquidity: You can access your money through policy loans without penalties or restrictions.

Growth: While not explosive, the growth is steady, predictable, and tax-advantaged.

The lesson is clear, if the most conservative, heavily regulated financial institutions in the world trust billions of dollars to life insurance cash value, maybe it’s time to reconsider what the financial talking heads are telling you.

Learn How to Use Life Insurance Like a Bank

If you want to learn more about BOLI, you just need to know where to look. We caution against finding your information on social media because much of what you see is opinion and not fact. Instead, you should look for more official sources of information or people you trust to tell you the whole truth.

Here are some resources we recommend for further research:

• The FDIC 
• US Bank Locations
• Lara Murphy Report

But the real opportunity isn’t in BOLI itself – it’s in understanding the strategy behind it and applying those same principles to your personal finances.

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! 

Book an Introductory Call with our team today, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster.

That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to our Privatized Banking Free Guide to learn more.