Many large employers are engaged in the financial practice of taking out life insurance policies on thousands of their rank-and-file workers. These policies, called by the industry “corporate-owned life insurance” (COLI), but commonly known as ‘Dead Peasant’ insurance, are entirely separate from the life insurance many employers provide to workers as part of their benefits. ‘Dead Peasant’ policies list the company as the beneficiary, often without the knowledge of the workers or their families.

Throughout the past two decades, employers have taken out insurance policies on top executives, middle managers, and rank-and-file workers to protect the company from the untimely death of key executives, to pay retiree medical benefits and executive deferred-compensation programs. Employers’ benefit not only from the death of the employee under COLI policies, but also benefit by borrowing against the policies.

Better than Gold. Until recently, the premium for these policies were considered a tax-deductible business expense, as with any other employee benefit. The I.R.S. has disallowed this practice and is further investigating such forms of tax shelter. According to articles in The Houston Chronicle and The Wall Street Journal (WSJ), at least 100 large U.S. corporations boost their profits by taking advantage of the tax-shelter features of this life insurance.

Proceeds from the insurance policies are not considered taxable income to the person (or corporation) who receive it, which means that after taking a generous break for the cost of the policy, the corporation receives a tax-free gift after its employees pass away. According to a February 19, 2003, WSJ article, COLI cost taxpayers $1.9 billion in revenue each year on a federal basis. This is more than what it costs to provide tax deductions for interest paid on student loans.

It is often low-wage employees who are covered under these policies, whose families are in the worst position to deal with the financial repercussions of the loss of a wage earner. According to the April 28, 2002, SF Chronicle, Wal-Mart Stores, Inc. took out COLI policies on more than 350,000 of its workers in the 1990s. Wal-Mart has recently dropped its policies, but only after running into difficulties with the IRS and being sued by a victim. The IRS disallowed interest deductions on the retailer’s dead peasant insurance – which no longer made the insurance a profitable financial tool. Vicki Rice is suing Wal-Mart in federal court in New Hampshire after the company made $300,000 off the death of her husband, a Wal-Mart worker. Mrs. Rice and her two children received no proceeds.

Millions of corporate serfs have policies placed on their lives by Fortune 500 magnates. Other examples of companies cited by the April 19, 2002, Wall Street Journal, holding COLI policies on their employees include:

Nestle USA – 18,000 workers covered
Pitney Bowes – 23,000 workers covered
Proctor and Gamble – 15,000 workers covered
Enron, American Electrical Power, AT&T, GTE, Basset Furniture, Dow Chemicals, Diamond Shamrock, Olin, PPG Industries, Trans World Entertainment, Winn-Dixie and Walt Disney.

This practice, although legal in most states including California, is unjust and repulsive. It is the workers’ families who need the benefits of life insurance, not rich corporations or their executives.


According to a December 30, 2002, Wall Street Journal article on COLI, after the September 11th terror attack, some of the life insurance pay-outs went to employers and not to the victim’s families. Hartford Insurance Company alone paid out more than $2 million to employers relating to the attacks of September 11th. COLI life insurance covers death in the event of war as well, which, depending on the number of insured American lives lost in a war with Iraq, could further highlight this perverse tool of corporate finance.