There is an old saying in the world of real estate: "Why rent when you can own?" We apply this logic to our homes, our cars, and our businesses. Yet, when it comes to the single most important financial safety net for our families: life insurance: most executives are content to "lease."
If you are a key leader in your organization, you likely have a robust Group Term Life Insurance policy. It’s a standard part of the executive package. It looks good on paper. It’s easy. But it’s also a "lease" that can be canceled by the "landlord" (your employer) at any time.
The Trap of the 'Leased' Benefit
Group life insurance is tied to your W-2. It is an "at-will" benefit. If you leave the company for a better opportunity, if the company is sold, or if you are part of a corporate restructuring, that coverage vanishes.
For the "Sandwich Generation," this is a catastrophic risk. You are at the age where your "insurability" is at its peak value, but your health might be starting to show the wear and tear of a high-stress career. If you lose your group coverage at age 55 and try to go out into the private market to replace it, you may find that it is either prohibitively expensive or, worse, you are no longer insurable.
Why would you leave your family’s fundamental security in the hands of a HR department?
Ownership Through REBA and Split Dollar
The alternative is moving from "leased" benefits to "owned" benefits. At Schiff Executive Benefits, we implement executive retention strategies that provide Portable Peace of Mind.
Two of the most effective structures for this are the Restricted Executive Bonus Arrangement (REBA) and Split Dollar Life Insurance.
1. The Restricted Executive Bonus (REBA)
In a REBA, the company pays the premiums on a life insurance policy that you own. The "Restricted" part means the company can put a vesting schedule on the cash value, ensuring you stay motivated and aligned with the company’s long-term goals. However, the death benefit is yours from day one. If you leave, you take the policy with you. You own the "house"; you’re just getting help with the mortgage.
2. Split Dollar Life Insurance
This is the gold standard for high-level executive benefits. The company and the executive "split" the costs and the benefits of a permanent life insurance policy. It provides massive amounts of coverage (often into the millions) with significant tax advantages. More importantly, it is structured to be portable. It protects your spouse and your children regardless of what happens in the boardroom.
Protecting the 'Sandwich'
When we talk about the "Sandwich Generation," we are talking about the people who have the most to lose. You are the financial pillar for your children and often the safety net for your aging parents.
If something happens to you, your family needs more than just a "temporary" group policy. They need a permanent, owned asset. Split dollar life insurance and REBAs provide that. They ensure that your family’s lifestyle, your children’s education, and your parents' care are not tied to your current employment contract.
Restoring Alignment and Retention
For the employer, these plans are far more effective than simple cash bonuses. Cash is forgotten the moment it’s spent. An "owned" benefit plan that provides family security is a daily reminder of the company's investment in the executive’s life. It creates a "velvet cage" that rewards loyalty while providing the executive with something they can’t get on their own.
We often ask our clients: What keeps you up at night? Is it the fear of leaving your business in the hands of a widow? Is it the fear of your top talent being poached by a competitor?
By moving benefits from the "leased" column to the "owned" column, we solve both. We provide the executive with the security they crave and the company with the retention they need.
Moving Forward
Your career is a journey, but your family’s security should be a permanent destination. Don’t settle for "leased" peace of mind.
If you’re ready to look at how COLI or Split Dollar structures can fortify your family’s future, let’s have a conversation. It’s time to take the "Weakest Link" out of your financial plan and replace it with a foundation of ownership.
Sit back, grab your coffee, and let’s look at your current benefit summary. If you see "Group Term" as your primary protection, we have work to do.
Visit our latest posts to learn more about navigating the complexities of executive life, or contact us to start building your Perfect Plan®.