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Dead or Alive: How Companies Profit from Key Employee Life Insurance Policies

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When you accept a new position at a company, the last thing on your mind is what happens if you die. Yet, for many corporations, your death could be worth more to them than your life. Enter Key Employee Life Insurance (often called “dead peasant insurance”).

This type of policy allows a company to purchase life insurance on its employees—especially executives or those deemed “key” to operations. The company owns the policy, pays the premiums, and is the beneficiary. The kicker? Even if you leave for another job years later, unless the policy is canceled, the old company may still cash in when you pass away.

How Long Can They Keep It?

If a company takes out a Key Employee Life Insurance policy on you, they may legally continue to own and benefit from it long after you’ve left the job, unless they choose to surrender or transfer it. This means if you move to Company Y and tragically pass away, Company X still collects the payout, not your family, your estate, or your new employer.

This arrangement is perfectly legal in many states under corporate-owned life insurance (COLI) laws, though it has sparked controversy for decades.

Real-World Examples of Profiting from Employee Death

  • Walmart (1990s–2000s): Walmart notoriously purchased life insurance policies on thousands of rank-and-file employees without their knowledge. The company reaped millions in death benefits, while grieving families received nothing. Lawsuits later revealed Walmart was just one of many large corporations engaging in the practice.
  • Banks and Financial Institutions: JPMorgan Chase, Wells Fargo, and Bank of America collectively held billions in corporate-owned life insurance policies, often described as a “tax shelter with a death benefit.” Reports suggest major U.S. banks maintain upwards of $100 billion in COLI coverage.
  • Dow Chemical and Procter & Gamble: These companies were also revealed to have invested heavily in COLI, often benefiting from the deaths of employees who had long since moved on.

Why Do Companies Do This?

  1. Financial Cushion: The payout helps offset the loss of a key employee, covering recruitment, training, or profit loss.
  2. Tax Advantages: Death benefits are usually tax-free, making COLI a lucrative corporate asset.
  3. Investment Strategy: Some corporations use COLI as a long-term investment, borrowing against it for capital while waiting for the eventual payout.

The Ethical Debate

Critics argue this practice commodifies human life, reducing employees to mere financial instruments. Families often remain unaware that a past employer profits from their loved one’s death. Supporters, on the other hand, insist it’s a legitimate business practice to safeguard corporate stability.

References

  • Barmash, Isadore. “The Corporate Life Insurance Scandal.” The New York Times, 1990s.
  • Crenshaw, Albert B. “How Corporations Profit When Employees Die.” Washington Post, 2002.
  • U.S. Government Accountability Office (GAO): Reports on Corporate-Owned Life Insurance.
  • Wall Street Journal coverage on Walmart’s “dead peasant insurance” lawsuits.

About the Author

A.L. Childers is an author and researcher who explores the hidden truths behind corporate practices, government policies, and the forces that shape our lives. With a sharp eye for uncovering what others overlook, Childers writes to inform, inspire, and ignite change.

Disclaimer

This blog is for educational and informational purposes only. It is not intended as financial, legal, or insurance advice. Readers should consult qualified professionals before making any decisions regarding life insurance or corporate policies.

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