A split-dollar arrangement is a method of purchasing life insurance in which the premium payments and policy benefits are disproportionately divided between two parties, often a business and an employee or a shareholder, but sometimes also two individuals or an individual and a trust. The premium payments and policy benefits are split between the parties in a manner specified in a split-dollar agreement.
Split dollar is a method of buying life insurance, not a reason for buying it. A need for life insurance should always exist before a split-dollar arrangement is considered.