An underutilized tool for unprecedented times: COLI

Mike Dunn

By Mike Dunn
Head of Institutional Insurance for Institutional Solutions at Massachusetts Mutual Life Insurance Co. (MassMutual).
Posted on May 14, 2020

In today’s climate, companies across the globe are navigating many challenges due to the economic repercussions of the health pandemic.

Executives know that prospective and future employees will look at how their company handled this challenging period, and that employee benefits will continue to be a crucial factor for retaining and attracting top talent. Rewarding your high impact players is more important than ever to ensure your team is operating at optimal capacity. How can you help ensure that your firm is well-positioned and staffed now, during the economic recovery and beyond?

Corporate-owned life insurance (COLI) is an impactful option, allowing COLI advisors to offer tailored plan designs using institutionally priced life insurance solutions. COLI is often used to informally fund non-qualified deferred compensation (NQDC) plans and other employee benefits, providing a win-win for both employee and company.

Offer unique benefits that help the company and its employees

For example, for a company that employs top earning sales employees, well-known for their established business practices and relationships, losing those employees could be detrimental to the organization and potentially a windfall for competitors. Offering employee benefits to these individuals in addition to their core salary is a way of expressing appreciation and ensuring these individuals feel reassured and retained. Employee benefits, while worthwhile, can be expensive. COLI is an attractive, flexible and underutilized funding option available to companies looking to finance their benefits package. With a COLI policy, the company is the purchaser, beneficiary, and owner of the insurance policy1. Policy proceeds can be used to fund employee benefits that might otherwise be too cost prohibitive. As an added bonus, COLI is tax-efficient to the company because earnings from investment gains inside the policy typically are tax-deferred, which allows for a neutral financial impact.

Provide employees with enhanced compensation

It is no secret that finding and keeping senior leadership is essential for a company’s success. What if your most impactful employee retires or is incentivized to join another firm? He or she would need to be replaced. Creative solutions to attract new team members and provide a competitive benefits package can help your company stand out. For senior employees, employee stock options and 401(k) plans may be table stakes. By using COLI to fund supplemental benefits, you can differentiate your company, and NQDC plans can help key employees reduce their tax liability during high-earning years. Knowing that employee benefits are being funded on a current basis may also increase employees’ confidence in the stability of the company.

Be prepared now, and in the future

The benefits your company offers can impact its ability to attract and retain indispensable leaders both now and in the future. It is critical, particularly during these uncertain times, to be armed with the right team, benefits, and compensation plans. It is equally important to work with an experienced company that is there for the long term and can help you navigate the choppy waters and nuances of institutional insurance solutions.

For over 168 years, MassMutual has helped individuals and institutions weather the toughest of storms. Our stability and commitment to supporting our clients with financial solutions, information, and resources during these challenging times remain enduring. We encourage you to visit for more information about COLI and other MassMutual Institutional Solutions.


Companies must obtain each employee’s consent prior to purchasing the insurance policy insuring his or her life, and the employee must be notified about the beneficiary designation and the maximum amount of insurance coverage under the policy on his or her life.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees, and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. 

Before purchasing a variable life insurance policy, investors should carefully consider the investment objectives, risks, charges and expenses of the policy and its underlying investment choices. For this and other information, they should obtain the prospectus for the policy and the prospectuses (or summary prospectuses, if available) for its underlying investment choices from a registered representative.

Securities products and services offered through registered representatives of MML Investors Services, LLC, Springfield, MA 01111-0001 or a broker-dealer that has a selling agreement with MML Distributors,LLC, Springfield, MA 01111-0001. [Both MML Investors Services, LLC and MML Distributors,LLC are subsidiaries of MassMutual, Springfield, MA 01111-0001. 

Insurance products issued by Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001.