How Does Bank Owned Life Insurance Work? 
Bank Owned Life Insurance or BOLI is a process where a bank purchases life insurance on a key employee -LRB- executive or director -RRB- , usually several of them . In return for allowing the purchase of life insurance on their lives , the bank will traditionally offer some sort of additional compensatory benefit to the employee known as non-qualified deferred compensation . This can come in several different forms from an extra life insurance protection to additional retirement income benefits provided the employee stays with the company for a certain period of time . The bank then can include cash values from the life insurance policy on its balance sheet . There is one important note regarding this . Due to banking regulation , banks are only allowed to recognize 50 % of cash values in an insurance company 's general account on their balance sheet . As a result , several companies have specialized BOLI products that use separate accounts -LRB- typically found with variable life insurance products -RRB- so the bank can recognize 100 % of the cash surrender value on their balance sheet . 