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The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.
Question: May a national bank own key person insurance on the lives of its board of directors?
Answer: In most cases, the answer is yes.
National banks are governed by rules promulgated and enforced by the Office of the Comptroller of the currency (OCC). The OCC published a ruling in 2004 setting forth standards a bank must follow when it purchases and maintains key person life insurance—including insurance on the lives of its directors.
The OCC requires a national bank to justify
- The need for the insurance,
- the choice of policy,
- the choice of issuing carrier, and
- the reason alternatives were rejected.
As you might expect, the OCC also requires that the bank document its decision-making process.
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