Are 'Dead Peasant' Life Insurance Policies Fair?

uscitizen

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Are 'Dead Peasant' Life Insurance Policies Fair?
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Text Size- / +By CLAIRE SHIPMAN (@ClaireShipman) and CHRIS STRATHMANN
Oct. 2, 2009
Life insurance used to be rather straightforward, known for offering security to loved ones in a tough time.

So when Irma Johnson learned that her husband, Daniel, who died of brain cancer, had been insured for $1.5 million, it should have been at least a small comfort.

But she did not receive the money. His employer did.
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Dozens of blue chip companies have these policies, according to Myers. But only banks are forced to reveal them, and several have billions of dollars worth of policies.

"The driving force behind it is the tax deductions," he said.


ABC News Photo Illustration
In the corporate practice dubbed "Dead Peasants" life insurance, companies wager on employees' lives, expecting to make money when they die.The life insurance policies were designed to allow companies to insure a few crucial executives. Savvy companies then realized they could also get a tax break by insuring many lower-level employees.

The financial scheme doesn't actually cost the employees anything, except, some say, their trust.

Betina Tillman felt shocked and deceived when a reporter from The Wall Street Journal told her that her brother, a music store cashier, was insured by his employer for $339,000 when he died, despite the fact that he no longer worked at the store.

Employers Collect Life Insurance on Employee Deaths, 'Dead Peasants' Life Insurance - ABC News

I think I will visit the nursing home and take out a few policies on some old farts.
The payoff is tax free for corporations.
 
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uscitizen

uscitizen

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And why can't i just pick someone and take out a life insurance policy on them with myself as beneficiary?
I am an individual just like a corporation.
 

KissMy

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And why can't i just pick someone and take out a life insurance policy on them with myself as beneficiary?
I am an individual just like a corporation.
You must have an Insurable Interest.

In my state it against the law to get insurance benefits from someone who you were not dependent on, financially responsible for, or in your immediate family.

The corporation that took out the policy fits the profile, they had an "Insurable Interest" in their employee. You do not have an "Insurable Interest" going around insuring old or terminally ill people. You could lend to, marry or employ an old person & then take out a policy on them.

Credit default swaps - Yves Smith argues that this was related to the financial crisis of 2008 because hedge funds and others allegedly helped produce bad subprime mortgages on purpose so that they could create an "Insurable Interest" to allow Wallstreet banks to buy insurance on subprime borrowers, and then profit when the home buyers failed to make payments. This would also allow the bankers to buy life insurance on the subprime borrowers. You know all those subprime borrowers who lost everything tend to be careless with their lives & more prone to suicide. This is another reason for the demise of AIG.
 
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