What is a split dollar insurance policy ?

Split dollar insurance is not a type of insurance. It is an arrangement by which the premiums, cash values, and death benefits of a regular insurance policy are split by two or more participants. A split-dollar plan is a tool for an employer or owner of a small business to reward hard-working employees. By using a split-dollar plan, the owner can provide important key employees with life insurance protection and at the same time help them earn a fund to provide for additional retirement income.