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Dead Peasants insurance
March 14th, 2008
No, it’s not about finding dead peasants, digging them up, and insuring them, fascinating as that might sound.
It’s about employers getting insurance windfalls for dead employees.
Employers can take out life insurance policies on their employees, without the employee knowing a thing about it.
This delightful little hobby, which involves employers making beneficiaries out of themselves without the consent of the employee, executor, family, or any other relevant party, is a nice little potential cash cow.
It can pay executive wages, and other crucially important things like that.
All you have to do to become a charity for these worthy causes is die.
Puts a whole new complexion on people roaming the office with a machine gun or a machete, doesn’t it?
Is it legal?
It’s not necessarily illegal.
What’s contestable is that someone has an undisclosed stake in the employee’s final career move. That’s a real weak point, and it’s really a matter of making it stick as case law.
The insurance logic is that the person paying the premiums gets the benefits.
According to the American Council of Life Insurers, employers pay $8 billion a year, so it’s a real cottage industry, to some extent. These policies comprise 20% of the life insurance sold per year. Companies get tax breaks, and the death benefits are tax free.
So if you’re literally “dying to earn a living”, you now know who’s going to be making the money from your efforts.
Stop cheering and dancing in the streets, there’s more.
Some of the biggest companies on Earth now do this. Congressional reforms were scuttled by the insurance industry.
This practice isn’t exactly advertised by the insurance industry, either. It’s a dirty little secret, and you can probably guess what people think of it when they discover they’ve just paid for the board to go to the Bahamas.
Executives get insured, too, just in case one of them is so incautious as to die. Most of it, however, is the broad base, general, “wait till they drop then pick up the phone” sort of insurance.
The IRS isn’t too thrilled, and considers the whole concept a tax shelter, which as you can see isn’t unreasonable.
Most states have “advise and consent” laws requiring consent from employees, but some don’t, and a roaring trade is being done in the ones that don’t. It’s just a matter of signing a few papers over lunch.
In case you’ve been wondering what management has been doing all these years instead of managing, now you know.
The mentality here is obvious.
It stinks of executive graft.
Whether it’s appropriate for business to obtain any money whatsoever from employee deaths is generally considered immoral.
That’s putting it mildly, when you consider that many employees’ families and dependants live in severe financial situations, and theoretically have no claims on any benefits.
They have to fight court cases to get anything. If costs aren’t awarded, they have to pay those, win lose or draw.
Dead peasants insurance is referred to by some as “business planning”. One possible reason for this view is that the policies can act as a hedge against compensation claims. That’s relatively rational, but doesn’t quite gel with the other scenarios. If so, the money wouldn’t be seen as usually going to the company.
It definitely doesn’t ring true in terms of compensation, overall. Legal wars are fought over compensation, daily, and this part of the equation hasn’t exactly been making headlines in the process.
This isn’t a legal loophole, it’s the Grand Canyon in black and white.
A person who is the subject of a legal contract must have rights, and must be informed.
Is that so difficult?
Is it unreasonable?
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