Method for combining loan with key employee life insurance

Claim 1

A method for computerized administration of leveraged split dollar life insurance coverage, by contributions of an employer and an employee to pay for a loan of insurance premiums, comprising the steps of: defining at least one available insurance agreement for a life insurance policy to be owned by the employee, by storing data representing terms of the insurance agreement in a memory of a computer, the terms of the insurance agreement including a relationship of premium payments due in order to purchase life insurance over a predetermined term of at least seven years, in a range of values encompassing at least one of a predetermined death benefit range, a predetermined cash value range, and a predetermined premium payment range; defining at least one available loan agreement to be taken by the employer, by storing data representing terms of the loan agreement in the memory of the computer, including principal and interest payments needed to pay off loans in predetermined principal amounts over said term of years for a principal amount over a loan principal range, the life insurance having a cash value available to pay off the loans and being collaterally assigned to the employer, the terms of the insurance agreement and of the loan agreement forming a set of constants defining insurance policies and loans over ranges of death benefits, cash values, loan principals and terms of years; for at least one employee, defining at least two quantitative factors chosen from a desired death benefit amount, a desired contribution level of the employer and a desired contribution level of the employee; processing by computerized data processing means the insurance agreement terms and the loan agreement terms stored in the memory, to equate a sum of the contribution levels of the employer and the employee with a particular loan principal such that said sum of contribution levels is sufficient to offset the principal and interest payments of the loan agreement, while calculating a plurality of incremental employer payments and employee payments over time; and, adjusting by said data processing means the contribution levels of the employer and the employee to determine actual employer payments and employee payments such that: the actual employee payments include scheduled premiums in a calculated amount payable for at least seven years; in at least a first three years of the term of years the actual employer payments include employer unscheduled premiums, and over the term of years the actual employer payments include all employer unscheduled premiums plus interest on the loan agreement; no more than seventy percent of the sum of all scheduled and unscheduled premiums to be paid under the insurance agreement are paid during a first four years of the term of years from said scheduled and unscheduled premiums; and, after seven years of the term of years, the employee may terminate actual payments and use loans on the insurance policy to pay all or part of the scheduled premiums; whereby, the actual employer and employee payments are sufficient to support a split dollar insurance policy owned by the employee and providing a tax-free death benefit to beneficiaries of the insurance policy equal to a difference between the death benefit and the loans on the insurance policy taken out by the employee.

Claim 2

A method for computerized administration of leveraged split dollar life insurance coverage, by contributions of an employer and an employee to pay for a loan of insurance premiums, comprising the steps of: defining at least one available insurance agreement for a life insurance policy to be owned by the employee, by storing data representing terms of the insurance agreement in a memory of a computer, the terms of the insurance agreement including a relationship of premium payments due in order to purchase life insurance over a predetermined term of at least seven years, in a range of values encompassing at least one of a predetermined death benefit range, a predetermined cash value range, and a predetermined premium payment range; defining at least one available loan agreement to be taken by the employer, by storing data representing terms of the loan agreement in the memory of the computer, including principal and interest payments needed to pay off loans in predetermined principal amounts over said term of years for a principal amount over a loan principal range, the life insurance having a cash value available to pay off the loans and being collaterally assigned to the employer, the terms of the insurance agreement and of the loan agreement forming a set of constants defining insurance policies and loans over ranges of death benefits, cash values, loan principals and terms of years; for at least one employee, defining at least two quantitative factors chosen from a desired death benefit amount, a desired contribution level of the employer and a desired contribution level of the employee; processing by computerized data processing means the insurance agreement terms and the loan agreement terms stored in the memory, to equate a sum of the contribution levels of the employer and the employee with a particular loan principal such that said sum of contribution levels is sufficient to offset the principal and interest payments of the loan agreement, while calculating a plurality of incremental employer payments and employee payments over time; and, adjusting by said data processing means the contribution levels of the employer and the employee to determine actual employer payments and employee payments such that: the actual employee payments include scheduled premiums in a calculated amount payable for at least seven years; in at least a first three years of the term of years the actual employer payments include employer unscheduled premiums, and over the term of years the actual employer payments include all employer unscheduled premiums plus interest on the loan agreement; no more than seventy percent of the sum of all scheduled and unscheduled premiums to be paid under the insurance agreement are paid during a first four years of the term of years from said scheduled and unscheduled premiums; and, after seven years of the term of years, the employee may terminate actual payments and use loans on the insurance policy to pay all or part of the scheduled premiums; whereby, the actual employer and employee payments are sufficient to support a split dollar insurance policy owned by the employee and providing a tax-free death benefit to beneficiaries of the insurance policy equal to a difference between the death benefit and the loans on the insurance policy taken out by the employee.