How did it get the name “Dead Peasant” insurance?
Dead peasants insurance is actually a pejorative name for corporate-owned life insurance. This practice is also known as janitor’s insurance and can be used by employers to obtain payments in case the employee dies. For employers, this type of life insurance has the role of a compensation for the financial implications that could be involved in the loss of a key employee from a company.
Corporate-owned life insurance started to be used when important companies have lost key employees, such as high ranking executives and this has led to a great financial loss for those firms. In order to fill the gap, employers had to hire new people, pay their training and literally start over with the respective work positions. In time, companies took advantage of some of the legal restrictions that were lifted. They began to make dead peasants insurance for employees with lower ranks, many times without them knowing it.
Today, the so called janitor’s insurance is still used a lot, but many things changed about it since it was first used. This type of life insurance is now regulated by the state, but it is still tax-free. Employees must be notified before their hiring company buys a dead peasant insurance for them. The amount of the coverage must be stated as well. The employer must also provide information about the complete or partial ownership of the coverage.
While families can benefits a lot from life insurance in general, dead peasant insurance is completely different. This type of policy is bought by employees and will retain it after the death of an employee to get a tax-free deduction. There were lawsuits in the past between families of the deceased employees and the companies these individuals worked for. The reason was that families didn’t think it is fair that firms are getting so much compensation for the death of their loved one.