A "spilt-dollar" can decrease life insurance premiums.

In a typical life insurance policy the premium for the policy is paid by the insured and they have assigned a beneficiary to receive the payout of the policy upon the death of the insured. In a split-dollar policy the payout amount is split between two persons. This type of policy is most common when an employer supplies the policy. Many times an employer will provide life insurance coverage with little or no life insurance premiums cost to the employee. In exchange the employer owns half the policy or a designated portion of the policy. Upon the death of the insured the employer who provided the policy and the insured's beneficiary would split the amount of the policy according to the policy guidelines stated in the employment contract. Each year the employer pays a part or all of the premiums associated with the life insurance policy. As the employer pays a portion or all of the premiums the amount paid is deducted from the overall value of the policy. So the longer your are employed with the company providing the life insurance policy the less money your beneficiary will receive upon your death. When you pass, your employer will subtract the amount they paid in premiums from the value of the life insurance policy and then whatever is left over will be paid to the beneficiary you assigned.

If you purchased your policy a while ago or have been employed with the same company for a long time you may want to revisit the policy details and decide if the beneficiary chosen at the time is still the one who you would like to receive your death benefits. This can be a problem if the beneficiary you assigned was a spouse you have since divorced or if you have had children since signing up for the policy. Some people claim their parents as beneficiaries and do not change it once they are married or when their parents pass away. If you do not periodically review and update your policy it can lead to lengthy and costly court battles for your loved ones.

There are two types of split-dollar policies; collateral and endorsement. In a collateral split dollar policy the employee own the policy. The life insurance premiums paid by the employer are interest free but must be paid back upon the cash out of the policy. In an endorsement split dollar policy the employer owns the policy and the employee can only choose the beneficiary. In this type of policy the beneficiary receives a predetermined sum of the policy from the employer. Usually the cash value of the policy minus premiums and interest paid thus far. Those who are experts in the industry suggest that you obtain a minimum of three free quotes from multiple providers.