I just read an article claiming that a major retailer has life insurance coverage on its employees with the corporation as the beneficiary. (Apparently this is called “dead peasant” insurance.) Can anyone out there give me the dope on this? And “insureable interests”? and how they would make money doing this?
I don’t know but it sounds like a great idea.
This site has all the information you need .
I’ve also heard it called “janitor’s insurance”. IIRC, Bank of America and other large corporations use it frequently.
It’s rather ironic, but perhaps not a concidence, that we first started hearing about janitor’s insurance just when we’d heard about slave insurance in the 19th century.
I’d like to know how the money is made. As an individual, a death benefit would bring my family a lot of money, but as an employee, I would think that the benefit would be outweighed by the premiums paid for all the other employees who didn’t generate a death benefit. If that were not the case, the insurer wouldn’t make any money, would they?
So there must be something else. All the info I’ve found so far comes from people with an ax to grind (columnists, agitators, activists, etc) who swear that this is an evil practice designed to harvest money from the misery of the common people. These, of course could hardly be considered unbiased sources.
Is there anyone out there in the industry who knows the details?
I’m guessing here, but I think this may be tax-driven. The premium may be tax-deductible, the policy proceeds tax-free. Hence there is a tax-saving which is, in effect, shared between the insurer and the employer.
It makes no difference to the employee whether his life is insured or not. If my analysis above is correct it is the US taxpayer who is being exploited here, not the employees.
That’s exactly it. It’s tax-sheltered. Whether it is a loophole worth trying to close or not is another question. As you observe, it’s pretty much no skin off my nose if my employer wants to take out a life insurance policy on me.
From the standpoint of being an ordinary taxpayer, it becomes a question of whether proposed legislation to put a stop to the practice would recover enough extra revenue from corporations to be worth it, and would not create extra problems. The proposed legislative solutions disallow life insurance policies taken out by people without an “insurable interest” in the insured individual. Such “insurable interest” seems rather difficult to define.
The title of this thread reminded me of a nineteenth century novel entitled Dead Souls. The story is set in Russia where a stranger goes around to various noblemen’s estates and offers to “buy” the title to deceased serfs. Most people consider him a nut, and take the pittance he offers per head. It turns out that he’s running a scam based on the fact that the government only updated it’s census every ten years or so, and he makes a fortune by amassing a huge “estate” that exists only on paper.