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.