Business Use of Life Insurance: Death Benefit Only Plans

A death benefit only (DBO) plan is one form of a group carve-out plan. An employer uses a group carve-out plan to remove highly compensated employees from the company's group term life insurance plan and obtains individual life insurance policies. Selective benefits that employees receive under the alternate arrangements are usually more generous than those provided under the group term life insurance plan.

A DBO plan is an employee benefit plan that provides a death benefit to the employee's family or a named beneficiary (other than the employer) at the employee's death. However, the employer, as policy owner, retains the right to designate the policy beneficiary, amend, revoke, or terminate the policy. Because of this structure, the employee does not have sufficient interest in or control over the related policy to require its inclusion in his or her estate.

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