What is “Dead Peasant” Insurance?

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As the name suggests, cooperate-owned life insurance (COLI) is a life insurance that is purchased by an entity or corporation for its own corporate use. In this arrangement, the corporation can be a partial or total beneficiary on the policy. Basically, cooperate owned life insurance is not similar to group life insurance as some people may tend to believe because this form of insurance is designed to protect both the employees and their families and not the company itself. Other names (pejorative names) of this practice include dead peasants insurance of janitor’s insurance.

Notice and consent requirements for corporate-owned life insurance

Before entering the insurance contract, the employee must:

  • Be notified in writing that the employer has an intention of insuring the employees life and that the maximum face amount of which the employee will be insured the time the contract is issued.
  • Provide the consent to be insured under this form of contract during and after his/her active employment.
  • Be notified in writing if the employer will be a partial or sole beneficially of the death benefits that will accrue.

Specified exceptions to the corporate life insurance contract

  1. Directors and other employees who are highly compensated

There are specific requirements that except the persons mentioned above.

 

Corporate life insurance has existed in different forms for the past 100 years. The good features that it incorporates have facilitated its continued existence.

Conclusion and recommendation

Corporate owned life insurance is used by different firms to accomplish different company objectives. The rules and taxation principles of this form of insurance are complex and in most cases, it requires interpretation by experts. In the light of this, corporations that intent to make use of it are advised to consult corporate lawyers so that they can implement it successfully and effectively for the common good of the company at large.