by Susan2010 » Sun Jul 25, 2010 06:45 pm
Dead Peasants Indurance ( of course not legal name) has come to the public's attention...how has this kind of insurance been allowed to happen? ANd is there legislation to curtail such practices? If not , there shouldbe, it is disgusting..
Posted: Sun Jul 25, 2010 06:47 pm Post Subject: sorry for the typos
sorry about that... but you get my meaning, I am sure
Posted: Mon Jul 26, 2010 02:42 am Post Subject:
It's not legal any longer.
Posted: Mon Jul 26, 2010 12:42 pm Post Subject:
It's not legal any longer.
In most states, that's true.
So called "dead peasant" insurance refers to life insurance one purchases on persons who work for them, but truly do not represent a financial loss to that employer in the event of their death -- they can easily and quickly be replaced by another worker, usually with no visible disruption to the business activity.
The term comes from the medieval era, when landowners (lords) would need common folk (peasants) to harvest their crops or tend their flocks and herds. If the field worker or herdsman died, the landowner was not going to dirty his hands to keep things running. But he might actually have to pay someone to do the work instead of giving them a place to live in exchange for their labors. So insurance eventually became the means to the end. It also has some relevance to the "slave insurance" that was sold in America (and elsewhere) in the years prior to the Civil War.
More recently, in the early 2000s, WalMart made all the national news outlets when it became public knowledge that they were (and had been for many years) purchasing life insurance on some of their hourly employees and collecting the death benefit when the employee passed away. And it wasn't just the old folks on Social Security at the front door who were being paid to say, "Welcome to WalMart." (Sam Walton told managers to hire those folks because he knew how difficult it was for them to make ends meet, and he felt a responsibility to give them a decent job to do so -- never hear anyone talk about that, do you?)
Nothing illegal about the concept of a business buying insurance to compensate itself when an employee dies, in the broad sense that employers have an insurable interest in their employees, and that if an employee dies, the business will probably suffer some financial loss.
Unfortunately, for WalMart, what made the news were some poor, uneducated, unemployable women surrounded by their children, who were now destitute widows and orphans (through no direct fault of WalMart's). The common quotes played over and over on TV were things like, "My husband died and WalMart kept the insurance money."
And the use of the term "Dead Peasant Insurance". Demeans the worker at the expense of the employer.
Well, they paid for the insurance, and losing an employee causes WalMart (and other employers) to have to find a replacement, which costs money, so why shouldn't they be entitled to collect the insurance proceeds? Would WalMart truly suffer a hit to their bottom line? No, they probably wouldn't. That's what made it look particularly bad for WalMart. Smaller employers might have been able to say, "Yes, my bottom line is affected."
The real story was that these now-deceased husbands/fathers did not have any personal life insurance, and WalMart was made to be the villain by not "sharing" or "giving" the death benefit they had paid for with their own money with/to the families. Read any of the other threads here from people who ask if a life insurance beneficiary can be required to share the money with someone else -- and you'll see our answer is, consistently, "No, it's their money and they can do with it as they please."
Never makes the news like WalMart did. No front page stories in The Times with headlines: "John Smith Dies, Leaves Widow and Children Without Life Insurance Money. Family to Be Evicted.", even though it happens HUNDREDS of times EVERY DAY.
While not unlawful at the time, it looked bad. WalMart is a big target (and a favorite target of the unions and politicians), and they were made to be the scapegoat in an insurance process that many other large companies also used at the time, and had for decades.
is there legislation to curtail such practices? If not , there should be
In the aftermath, California and a number of other states have codified the practice as unlawful, and employers in those states can no longer purchase life insurance on their hourly employees unless the death benefit is payable to the heirs of the employee (or any other beneficiary of the employee's choosing) and not the company.
Employers are still permitted to obtain life insurance on "key" employees -- insurance that benefits the business, not the families of the employees -- but these persons must be of particular value to the business, such as an owner, executive, or other highly compensated employee, or one who possesses unique skills that are hard to replace or teach to others. Truly, these employees have a direct effect on the company's "bottom line".
The sudden loss of a typical hourly worker -- through death, simply quitting, or being fired -- does not have that same kind of impact on the profitability of a large business. Such employees are easy to replace -- even in good economic times, there are usually 10 to 100 persons applying for the opening, they won't require more than a couple of hours of informal training to start work, and will receive on the job training from a coworker (who may have only started a couple of weeks or months ago).
it is disgusting.
I will agree that, when misrepresented by TV news reporters, the practice appears to be unsavory -- however, only half of the story is being told. But I would disagree that the practice is "disgusting".
It is entirely understandable, because there is an insurable interest, and if a company has the money to pay the premium and voluntarily chooses to do so, why should they be legally prevented from doing it? It "hurts" no one, although one of the arguments is: by paying money for the insurance, the company has to charge consumers more for its products. But when WalMart often has the lowest price for some products, that argument is hard to defend.
On the other hand, when unionized employers pay fat wages to and are forced to pay for benefits for their employees, that drives up the cost of the products they sell, like groceries, toilet paper, cars, and hotel rooms. And state and local governments have to "raise revenue" -- i.e., taxes -- to support the wages, benefits, and retirement plans of their unionized workers. So I find that whole argument disgusting.
What to me is also disgusting is that people who have a need to provide their families with the security of future income in the event of their death -- which can easily be accomplished through personal life insurance -- choose not to do so. In some instances, legitimately, the issue is one of insurability or lack of financial resources, but in most cases, it is merely the lack of personal responsibility.
Should an employer be held accountable for an employee's decision not to purchase life insurance for his/her family? No state requires any employer to provide group life (or health) insurance to its employees, but they allow it, and the employees could be required to pay some or all of the cost. If asked to pay for their company-sponsored life insurance, many employees would probably say, "No!" even if the cost was a mere $5 per month for a $50,000 benefit.
Now, how about some "reality":
We see on the TV news unionized employees fighting tooth and nail to not have to pay for some or all of their employer-sponsored group health insurance, to the point of even going on strike against the employer when they're asked to pay just $5 per week (supermarket workers in Southern California were on strike for 5 months in 2003-2004 over exactly that -- and the $5 represented less than 15 minutes of work each week) for something their employers were paying $600 or more per month on behalf of each employee and their dependents, when most working folks are being asked to share up to half or more of their insurance cost by their employers. Now THAT'S disgusting!
Posted: Tue Jul 27, 2010 03:54 am Post Subject:
or something their employers were paying $600 or more per month on behalf of each employee and their dependents, when most working folks are being asked to share up to half or more of their insurance cost by their employers. Now THAT'S disgusting!
Well, then perhaps the employer was hoping some employees would die so they could save money. :lol:
Posted: Tue Jul 27, 2010 12:28 pm Post Subject:
Well, then perhaps the employer was hoping some employees would die so they could save money
May not be on the employer's mind, but I think it's always been the government's motivation for paying for flu shots for Medicare beneficiaries.
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