Advanced Underwriting Consultants

Question of the Day – June 17

Ask the Experts!

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

 

  1. The need for the insurance,
  2. the choice of policy,
  3. the choice of issuing carrier, and
  4. the reason alternatives were rejected.

As you might expect, the OCC also requires that the bank document its decision-making process.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.