# Why are tontines illegal, but life insurance isn't? **URL:** \ **Category:** Factual Questions\ **Created:** [October 23, 2012, 11:42pm UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680 "2012-10-23T23:42:05Z")\ **Posts on this page:** 7\ **Page:** 3
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 12, 2013, 4:13am UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680/41 "2013-05-12T04:13:09Z")
By the terms of his will, the accumulation was to continue for the life-times of his children, grand-children and great-grandchildren living at the time of his death, and to be distributed to the survivors of those individuals. That didn’t breach the Rule against Perpetuities, since the estate would vest in a life in being (at the time of his death) plus 21 years. ---
**Author:** ![Robot\_Arm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robot_arm/32/18280_2.png) [@Robot\_Arm](https://boards.straightdope.com/u/Robot_Arm)\ **Post date:** [May 12, 2013, 5:02am UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680/42 "2013-05-12T05:02:24Z")
> [@chappy51](#): > > so the agreement I have with seven of my senior friends…concerning the fine bottle of irish whiskey that goes to and is opened by the last two survivors at the death of the third remaing…is illegal? > murder is already illegal. making a tontine illegal doesn’t change anything. it just makes my friends and I criminals. but then again that is the purpose of many/most laws the gov’t passes. You’re in very good company. A similar tontine was established by the 80 men who took part in the Doolittle Raid on Tokyo during World War II. They have a collection of silver goblets and a bottle of 1896 cognac (the year of Doolittle’s birth). The last two survivors will drink a toast. The goblets and cognac are housed at the Museum of the United States Air Force in Dayton, Ohio, which makes me doubt that the practice is illegal. The goblets of those who have died are turned upside-down. As of their last reunion about a month ago, there are four survivors. ---
**Author:** ![Bremidon](https://avatars.discourse-cdn.com/v4/letter/b/ac91a4/32.png) [@Bremidon](https://boards.straightdope.com/u/Bremidon)\ **Post date:** [May 12, 2013, 9:23am UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680/43 "2013-05-12T09:23:44Z")
> [@SCAdian](#): > > I thought that was all life insurance was - a series of bets. > > You: I bet $50 I’m going to die this month. > Met Life: I bet $150k you’re not going to. Sorry for quoting this rather stale comment, but it always gets on my nerves when I read this old saw. Insurance, if you are not abusing it, is not a bet. At all. In any way. Whatsoever. I mean it. (Anybody wanna peanut?) Look at the two parties: 1. The insurance company: by issuing _lots_ of insurance policies, they spread out the risk to such an extent that practically no risk is left over. Most states have a great deal of oversight and heavily regulate the insurance market to make sure that it skews towards being very conservative and secure. In many states its possible for an insurance company to have a ton of reserves, be making lots of money, have well over a 99% chance of being able to cover everything, and _still_ get taken over by whatever insurance czar they have in that state because it wasn’t safe enough. 2. The beneficiary: Sure, they are going to get a wad of cash upon the covered person’s death, but they are also losing that person’s earning wealth / knowledge / skill as well. As others have pointed out, insurance companies are reluctant to issue policies where the beneficiary does not have a vested financial interest. In most cases, it’s not even legal anyway. If the insurance has been correctly configured, then the wad of cash covers the wealth loss. I deliberately did not include the “covered person” here, because other than some potential peace of mind while alive, they don’t really get anything out of the deal. They’re dead. ---
**Author:** ![Isilder](https://avatars.discourse-cdn.com/v4/letter/i/cc9497/32.png) [@Isilder](https://boards.straightdope.com/u/Isilder)\ **Post date:** [May 12, 2013, 10:11am UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680/44 "2013-05-12T10:11:16Z")
They banned insuring other people at the same time. (so that you couldn’t insure someone you had been told was subject of a hit… dirty hands and all that) The tontine is effectively insuring other people, and variations of the theme could bypass the ban on insuring other people. So they prevent the loophole by preventing anything except regular life insurance. ---
**Author:** ![Melbourne](https://avatars.discourse-cdn.com/v4/letter/m/b5e925/32.png) [@Melbourne](https://boards.straightdope.com/u/Melbourne)\ **Post date:** [May 12, 2013, 2:13pm UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680/45 "2013-05-12T14:13:44Z")
> [@drewtwo99](#): > > TriPolar’s point about life insurance is right. There is a good chance that your life insurance policy will be worth less than what the insurance company pays out for it. If insurance companies were paying out more than they took in and earned on interest, then they wouldn’t be in business. Not _Interest_. Investment. You don’t put the money in the bank and just wait for people to die: you invest it. Insurance companies are big investment companies capitalised by clients instead of investors. ---
**Author:** ![Bremidon](https://avatars.discourse-cdn.com/v4/letter/b/ac91a4/32.png) [@Bremidon](https://boards.straightdope.com/u/Bremidon)\ **Post date:** [May 13, 2013, 5:34pm UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680/46 "2013-05-13T17:34:01Z")
> [@Isilder](#): > > They banned insuring other people at the same time… Where exactly did you get that? Of course you can insure other people…as long as you have a financial interest. Companies take out life insurance on important employees all the time. Some companies even take out life insurance on low level employees. As long as they can show there’s something financial at stake (usually not hard in that case), then everything is ok. Or did you have some specific place/time in mind? ---
**Author:** ![cochrane](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cochrane/32/10441_2.png) [@cochrane](https://boards.straightdope.com/u/cochrane)\ **Post date:** [October 15, 2017, 8:21pm UTC](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680/49 "2017-10-15T20:21:29Z")
> [@tontinetrust](#): > > But in a life annuity, when someone dies the money goes to the shareholders of the life insurer. Following your logic, that feels more wrong than paying it to the surviving members which all took the same risks as each other Welcome to the forums **tontinetrust**. Please note that this thread is four years old and the poster you replied to is no longer with us, thus he will be unable to respond. ETA: Apparently, neither will **tontinetrust**. [Previous page](https://boards.straightdope.com/t/why-are-tontines-illegal-but-life-insurance-isnt/638680.md?page=2)