When you think of life insurance, you imagine protecting your loved ones. But what if your employer—not your spouse, children, or family—was the one cashing in on your death?
This isn’t fiction. It’s reality, and it has a name: Key Employee Life Insurance or, more disturbingly, “dead peasant insurance.”
What Happens to Your Life Insurance If You Leave a Job? The Secret No One Tells You
Here’s the unsettling truth: when a company purchases a life insurance policy on you, they own it. That means they pay the premiums, control the policy, and name themselves as the beneficiary. If you leave the company, the policy can still remain in force. Years later, if you die while working somewhere else, your old employer—not your grieving family—collects the death benefit.
For families, this can feel like a betrayal. For corporations, it’s just another strategy to manage “risk” and increase profits.
Key Employee Insurance: How Companies Keep Collecting Even After You’ve Moved On
This practice falls under Corporate-Owned Life Insurance (COLI). Originally, it was marketed as a way for companies to protect themselves financially if a top executive—like a CEO or VP—died unexpectedly. It made sense when policies were limited to true “key people.”
But by the late 1980s and 1990s, corporations began extending these policies to rank-and-file employees, many of whom had no idea their lives were insured for the benefit of their employer. Critics argue this turned human beings into financial instruments.
A Brief History: When Did “Dead Peasant Insurance” Begin?
- 1980s–1990s Expansion: Companies discovered tax advantages in holding massive amounts of COLI. Some policies were even written on thousands of low-level workers.
- Walmart Scandal (1990s–2000s): Walmart bought life insurance on cashiers, janitors, and clerks—employees who were anything but “key.” When they passed away, Walmart collected millions in benefits while families received nothing. Public outrage led to lawsuits, but the practice remained legal in many states.
- Banking Industry Boom (2000s–Today): Major banks like JPMorgan Chase, Wells Fargo, and Bank of America now hold more than $100 billion in COLI policies, treating them as investment tools.
The story of COLI is less about protecting companies and more about exploiting loopholes for profit.
From Walmart to Wall Street: How Big Business Cashes In
- Walmart: Sued after employees’ families discovered the company had quietly profited from their deaths.
- Dow Chemical & Procter & Gamble: Both exposed for holding large COLI portfolios.
- Banks: Some of the largest holders of COLI in history. In fact, for many banks, employee death benefits are listed as part of their investment strategies.
Are You Worth More Dead Than Alive to Your Employer?
It’s an uncomfortable question, but for some companies, the answer may be “yes.” If you leave a job, you may assume your connection with that employer is severed. But in the world of COLI, your body remains tied to their balance sheet.
For corporations, your death may be a payday. For your family, it’s a tragedy without financial relief.
Why Does This Happen?
- Tax Advantages: Death benefits are tax-free.
- Corporate Asset Growth: Companies can borrow against policies or treat them as investment vehicles.
- Lack of Transparency: Employees often never know policies exist in the first place.
The result is a controversial but perfectly legal practice that blurs the line between risk management and exploitation.
Notable Companies Known for COLI Practices
- Walmart
Infamously, Walmart purchased life insurance policies on rank-and-file employees without their knowledge. In one case, the company collected benefits when 132 Florida employees passed away under such a program. Walmart discontinued the practice around 2000 Wikipedia+9WFSU News+9Bankrate+9. - Procter & Gamble (P&G)
Held policies covering approximately 15,000 employees as part of their COLI portfolio The Wall Street Journal. - Nestlé USA
Maintained policies on about 18,000 employees Investopedia+15The Wall Street Journal+15Recruiter.com+15. - Pitney Bowes Inc.
Insured roughly 23,000 employees under COLI arrangements WFSU News+12The Wall Street Journal+12Investopedia+12. - Winn-Dixie
One of the earliest and most notable cases from the 1980s: they insured around 36,000 employees without their knowledge, coining internal references to “dead peasant insurance” Policygenius+10Recruiter.com+10quickquote.com+10. - Banks & Financial Institutions
Major players like JPMorgan Chase, Bank of America, and Wells Fargo hold collective COLI portfolios exceeding $100 billion, treating these life-insurance holdings partly as investment tools Investopedia+2CB Acker Associates+2. - Hershey’s
Cited on forums like Reddit in discussions of companies using COLI policies—though direct media citations are sparse Reddit.
Additional Mentions via Commentary
A Reddit post in r/todayilearned notes that companies such as Walmart, P&G, and Hershey’s have utilized COLI, although the latter’s practices remain less publicly documented Reddit.
Summary Table
| Company | Approx. Employees Insured / Notes |
|---|---|
| Walmart | Rank-and-file employees; practice ceased around 2000 |
| Procter & Gamble | ~15,000 employees |
| Nestlé USA | ~18,000 employees |
| Pitney Bowes | ~23,000 employees |
| Winn-Dixie | ~36,000 employees (1980s) |
| Major Banks | Collective COLI holdings > $100 billion |
| Hershey’s | Mentioned in commentary forums |
Why This Matters
These examples highlight how corporations have historically used COLI not just for high-level executives, but also on lower-paid staff, often without consent or awareness—prompting both public backlash and regulatory scrutiny.
Dead Peasant Insurance: What Actually Changed?
Walmart: lawsuits + public blowback
- What happened: Through the 1990s, Walmart bought corporate-owned life insurance (COLI) on tens of thousands of rank-and-file workers (not just executives). Families later learned the company could collect when former employees died and sued across several states. The Wall Street JournalMidland Reporter-TelegramCFO
- Outcomes: Walmart discontinued the broad program and paid multimillion-dollar settlements (e.g., a $5.1M class action in Oklahoma). Courts and coverage highlighted standing issues for families and fueled legislative scrutiny. CFOLaw360WFSU News
- Why it mattered: The cases moved “dead peasant insurance” into the spotlight, helping catalyze reforms that later required notice & consent and IRS reporting for employer-owned life insurance. The Florida BarIRSGovernment Accountability Office
Winn-Dixie: IRS wins the “tax shelter” fight
- What happened: Winn-Dixie insured roughly 36,000 employees, borrowed against the policies, and deducted the loan interest. The IRS disallowed the deductions as a sham tax-arbitrage play. The Tax Court and 11th Circuit agreed. QuimbeeCaseLaw
- What changed: The government’s win (and similar cases) slammed the door on leveraged COLI interest-deduction schemes, shaping later statutory guardrails. Justice DepartmentSenate Finance Committee
Dow Chemical (and peers): the “economic substance” line
- What happened: Dow bought COLI on thousands of employees and deducted interest/fees tied to policy loans. After mixed early results, the Sixth Circuit held Dow’s COLI transactions lacked economic substance, siding with the IRS. Similar outcomes hit American Electric Power and others. Justia Law+1Justice Departmentappalachianpower.com
- Why it mattered: These rulings cemented a judicial consensus: tax benefits built on circular policy-loan strategies wouldn’t fly, even before Congress rewired the rules. IRS
Wall Street (BOLI): regulators step in
- Context: Banks keep very large bank-owned life insurance (BOLI) portfolios (aggregate tens of billions) as long-term assets. Regulators didn’t ban BOLI, but tightened risk-management expectations.
- Regulatory response: In 2004, the OCC, Fed, FDIC, and OTS issued an Interagency Statement directing banks to treat BOLI like any other material risk (capital, liquidity, concentration, carrier risk, insurable-interest law, etc.). OCC.govOCC.govFDIC
The Big Legal/Policy Shifts (What’s different today?)
- Notice & Consent now mandatory (post-2006).
The Pension Protection Act of 2006 added IRC §101(j): to exclude death benefits from income, employers generally must obtain written notice and consent before issuance and the insured must be an employee at issuance (plus meet specific exceptions). Annual reporting via Form 8925 under §6039I also applies. IRSGovernment Accountability Office - “Economic substance” doctrine applied to COLI tax plays.
Courts repeatedly rejected interest-deduction schemes on COLI loans (Winn-Dixie, AEP, Dow), curbing the 1990s tax-arbitrage model. CaseLawJustia Law+1 - Regulators codified bank risk expectations.
The OCC/FDIC/Fed guidance (2004) set explicit supervisory expectations for BOLI purchase, monitoring, and concentration risk. OCC.govFDIC - Still legal to keep policies after you leave (if state law allows).
GAO testimony notes that, unless state law restricts it, employers can retain business-owned policies even after employment ends—one reason the practice remains controversial despite reforms. Government Accountability Office
Ethics: why people still bristle
- Moral hazard & optics. Even with notice/consent, the idea that a past employer can profit from a former worker’s death rubs many the wrong way. Policymakers worried about incentives and transparency, and law journals have urged Congress to go further. UC Law SF Scholarship Repositoryhastingslawjournal.org
- Data gaps. GAO highlighted that comprehensive data on prevalence/uses are limited, complicating oversight and informed debate. Government Accountability Office
Handy Timeline
- Late 1980s–1990s: Broad COLI programs proliferate; some states loosen “insurable interest” rules; companies extend coverage to rank-and-file. The Florida Bar
- 1999–2006: IRS and courts dismantle tax-arbitrage COLI (Winn-Dixie, AEP, Dow, others). CaseLawJustia Law+1
- 2004: Interagency BOLI risk-management guidance for banks. OCC.gov
- 2006: PPA adds §101(j) and §6039I, formalizing notice/consent and reporting for employer-owned policies. IRSGovernment Accountability Office
Sources & Further Reading
- IRS Notice 2009-48 (guidance on §101(j) employer-owned life insurance). IRS
- GAO testimony & report on business-owned life insurance (prevalence and oversight). Government Accountability Office+1
- OCC Bulletin 2004-56 & attachment: Interagency Statement on BOLI risk management. OCC.govOCC.gov
- Winn-Dixie Stores v. Commissioner (11th Cir.): interest deductions denied as lacking economic substance. CaseLaw
- Dow Chemical v. United States (6th Cir.) and related filings: economic-substance rejection of COLI tax shelter. Justia LawJustice Department
- American Electric Power v. United States (district court ruling against AEP; company release). Justia Lawappalachianpower.com
- Walmart litigation/settlements (news and legal coverage). CFOLaw360WFSU News
- Florida Bar Journal overview of EOLI abuses & insurable-interest shifts. The Florida Bar
- Investopedia explainer (plain-English summary of today’s COLI limits).
References
- Crenshaw, Albert B. “How Corporations Profit When Employees Die.” Washington Post, 2002.
- U.S. Government Accountability Office (GAO) reports on Corporate-Owned Life Insurance (COLI).
- Wall Street Journal, “Dead Peasant Insurance Lawsuits Against Walmart.”
- National Association of Insurance Commissioners (NAIC) guidelines on COLI.
About the Author
A.L. Childers is an author, journalist, and researcher who digs into the uncomfortable truths corporations and governments would rather keep quiet. Known for exposing hidden systems and overlooked stories, Childers writes to empower readers with knowledge that sparks change.
Disclaimer
This article is for educational and informational purposes only. It does not constitute financial, legal, or insurance advice. Readers should consult qualified professionals before making decisions regarding life insurance policies or corporate practices.
