A little known but widespread life insurance practice nicknamed “dead peasant insurance” is providing large corporations with a bounty of cash – conditioned, unfortunately, upon their employees’ deaths. The insurance – officially called corporate-owned life insurance (COLI) – has been going on since the 1980s.

Typically, to insure a life – or anything else for that matter – an insurable interest must exist. An insurable interest simply means that the person purchasing the insurance policy – the purchaser – has a reasonable expectation of profit or benefit from the continued life of the insured. Insurers usually require purchasers have a strong familial or emotional connection to the people being insured, or that they would suffer significant financial losses if the insured people died.

Although every state requires that an insurable interest exist at the time of application, six states – Delaware, Georgia, New Jersey, North Carolina, Pennsylvania, and Vermont – allow companies to take out life insurance policies on their employees without notifying them. Most states have laws requiring that companies advise their employees and seek their consent before purchasing the policies.

The Atlanta Journal-Constitution reported that corporations gain not merely from the tax-free life insurance benefits they receive when current or former employees die, but also can borrow money against these policies. Many companies even deduct the interest on these loans from their taxes. It is legal in some states, but not in others. For some of these companies, death benefits go to pay for executive bonuses and perks.

Over the years, Dow Chemical, Procter & Gamble, Wal-Mart, Walt Disney and Winn-Dixie have purchased insurance policies on more than 6 million rank-and-file workers. Wal-Mart claims it no longer takes out the policies; however, it still collects on existing policies.

Dead peasant insurance – simply another way the giant corporations take advantage of employees. It is a concept I never realized existed. Wouldn’t hurt to check out your employer to see if, indeed, you are worth more dead than alive.


About Charlotte A. Weybright

I own a home in the historical West Central Neighborhood of Fort Wayne, Indiana. I have four grown sons and nine grandchildren - four grandsons and five granddaughters. I love to work on my home, and I enjoy crafts of all types. But, most of all, I enjoy being involved in political and community issues.
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  1. mark says:

    How does this practice take advantage of employees?

  2. Mark:

    The employee has a right not to have his or her information used by the company to benefit the company. The idea of an insurable interest is to protect against those who have no discernable interst in either property or person from benefiting from the death or destruction of that item or indivudual.

    If this practice – lacking an insurable interest – is acceptable, then why can’t I insure your life? I have no insurable interest in you, and the corporations have none in the employee. These are not higher echelon management where the company could conceivably argue that the loss would damage the company – these are empoyees that Wal-Mart runs through by the dozens. Here today – gone tomrorow.

    Wal-Mart has no other reason than pure self-interest in insuring these lower paid workers. Why bother with the legal concept of insurable interest anymore?

  3. mark says:

    Then your quarrel is with the law, not the companies. They found a loophole- legal and financial, and exploited it to make profit. Until you succeed in having everyone work for the government, those profits are necessary to pay employees.

    Are you claiming the companies misused confidential employee info, like health histor and records? If so, the employees should sue. But the companies didn’t do that, did they?

  4. Mark:

    I disagree with your statement that “those profits are necessary to pay employees.” Thousands of companies pay their employees and do not sink to the level of insuring the employees’ lives. Taking out life insurance policies on thousands employees who are nameless and faceless – other than on their application forms – to the employer is nothing more than a profit-making venture.

    You didn’t address the issue of having an insurable interest. How are you justifying the fact that the companies have no insurable interest in the sense that it is applied to insurance policies in general? I will ask again, why don’t I just take out an insurance policy on you?

    Could it be that the insurance companies saw a way to make a quick buck right along with the Wal-Marts of the world? Legal or not?

    I don’t know what info they used, but I know unless there is an open enrollment period of some type, employees go through some form of physical exam. Now either the companies used health information in the employees’ files or they somehow scooted in under an open enrollment.

    But how could they do that if the open enrollment applies to the employees option to get coverage and not the companies’ right?

    As for the employees suing – they have in some states, and they have been successful. But how do you sue over something that you may know nothing about? The only way some of the employees found out was when a spouse or relative died. They then sued and with positive results.

    Many states at least now require the corporations to notify the employee and get consent.

  5. Iceironman says:

    By The Associated Press


    Didnt know where to post this story, what do you think of big oil and pharman making 12% profit. Looks like you would really, really, really hate BIG LAW.

    MOUNT VERNON, Ohio – The family of a student who said a science teacher burned the image of a cross on his arm settled a federal lawsuit with his former school district in their effort to move past the incident, a lawyer said Thursday.

    The Mount Vernon school board on Wednesday approved a $121,000 settlement with the family of the student identified in the lawsuit only as “James Doe.” The agreement would require the district to pay $5,500 to the family and $115,500 to the family’s lawyers.

    Also, if you are all about protecting the rights and privacy of the American citizen, might want to vote against those who support the healthcare bill. THis is because agencys may be sharing our personal info back and forth.

  6. Iceironman says:

    Did you see this one. Howard Dean gave a good answer as to why tort reform is not in the healthcare bill

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