What Is Split Life Insurance? 
I believe what you are referring to is what 's called `` split-dollar '' life insurance . This type of life insurance is generally used for businesses to help an employee purchase coverage - it can be used as a form of deferred compensation or as an incentive for the employee to work at that company . The idea of a split-dollar policy is to share or `` split '' aspects of the program between two parties -LRB- again - generally employer and employee -RRB- , including ownership , premiums , death benefits , cash value , and dividends . The advantages for the employee in doing this type of policy is to get the coverage they need to protect their family , but at a cheaper price . When the employer is paying premiums , the employee may be able to reduce their income tax liability when in higher tax brackets . Upon the death of the employee , the proceeds can be used to provide for estate liquidity . So why would the employer do all of this rather than make the employee buy an individual policy on their own ? In short , tax purposes . While it allows the employer to provide benefits to their employee with low costs , the portion of premiums the employer pays can be deducted for tax purposes . Upon the death of the employee , the employer is paid an amount equal to the sum of premiums paid on behalf of the deceased employee . These plans feature a good amount of flexibility for the employer as well , as they can modify or terminate the program at their discretion . 