Corporate Owned Life Insurance

The life insurance policies are generally for safeguarding the financial interest of a family, in case of death or their bread earner. However, you employer can also take these policies in your name. Your employer gets the return and also tax benefits against these policies. These policies are also a big source of income for insurance companies, so it’s not easy to eradicate this practice.

By and large individuals buy insurance policies for the security of their loved ones that monetarily rely on them. It is certainly not easy to envisage this state of affairs, however, if the main source of income for a family expires; the family can come across a grave financial dilemma. If your family is dependent upon your earning, it is therefore, of vital importance to take life insurance policy.

You may be aware of the fact, it is not mandatory that recipient of a policy should be an immediate family member. It is also not necessary that you must be the one to purchase insurance policy on your life. Your company can also do it.

Moral Values Related to Corporate-Owned Life Insurance

The term COLI (Corporate-owned life assurance) is also known as ‘dead peasant life insurance’. It means that an organization takes a policy for his worker. This has also been highlighted in a movie, “Capitalism a Love Story”. The organizations are still maintaining this practice, though it has caused a fury not only amongst the members of family, but also in other individuals.

Capitalism a Love Story

In this movie, Michael Moore plays the role of a public prosecutor who has unearthed many cases of “dead peasant insurance” claims. These policies which are purchased to protect the financial interests of the families of expired employees- are actually for investment purposes (a racket). The companies that seize such policies take loan against these and also have tax relaxation. These ultimately enhance the profit of company, but not give any benefit to an expired worker.

You must be thinking, how does it matter to you that you employer has bought a policy for you or not. It is true that a dead peasant policy will not cost you anything, but ethically it is wrong on account of certain grounds.

Zero Monetary Benefit to Your Family

With your death, your organization has nothing to lose; but certainly your family members will suffer a lot by not having your earnings anymore. Actually, they are the people who must be befitted with life insurance policy.

Infringement of Conviction

On ethical grounds, it is mandatory that the company must acquire formal approval of workers prior to purchasing life insurance policies for them. Still, many of the personnel and their families have no idea that their company seizes a policy on them.

Business over Your Dead Body

It is really a spine-chilling contemplation; is not it?

No Change is Anticipated in Dead Peasants Insurance Policies

Despite all the above mentioned, still these type of policies have not been sacked. In this regard Internal Revenue Service (IRS) is taking some action and inspects those policies that seems fake to them. Nonetheless, a large number of big business concerns are still maintaining this practice. In fact the corporate owned life insurance policies make a lot of money for them. In this regard, note the following facts:

The share of such policies comprise of twenty percent of the total life insurance plies sold on yearly basis.

It is anticipated that such type of policies will offer the organizations more than $9 billion in terms of tax relaxation for the next five years.

For purchasing these policies the business concerns pay $8 billion to insurance companies in a year.  

The dead peasant life insurance is therefore, a huge source of income for the insurance companies. Until or unless, Govt. passes a decree against these policies, this practice will continue and your company may hold a policy on you. You must therefore, carefully go through the papers before signing these, so that consciously you don’t become part of this business.