ABC News 'Stunned' To Discover Dead Peasant Insurance

[Joanne98]

Sat Oct 03, 2009 at 02:02:46 AM PDT

Michael Moore's Capitalism, A Love Story has revealed a deep dark secret to the intrepid reporters of ABC News - so-called Dead Peasant Insurance, the practice of companies taking out secret life insurance policies on their low-level employees, with the benefits paid out to the company upon the employee's death, even if they no longer work at the company.

(Of course, if they'd been reading dailykos, they would have learned all about it many years ago :) )

Well, we don't expect mainstream news reporters to actually be all that aware of what's going on around them, much less report it, so no surprise there.

The problem is the spin that Claire Shipman, deep in her ignorance, goes on to put on the situation:

Alien Abductee's diary :: :: "It's a financial scheme that doesn't actually cost the employees anything except, some say, their trust."

And this:

"Nobody's really being hurt, but it's so clearly creepy. So how do you get at what really is wrong with this?"

Rep. Gene Green tries to give her a progressive answer, but what he comes up with is weak and doesn't make a whole lot of sense:

"We hope our laws are based on not only fairness but morals, and to me, it's immoral to benefit from your death if I don't know you."

Um, people benefit all the time in all sorts of ways from the deaths of people they don't know.

The problem isn't that. The problem is that it's A CORPORATE TAX DODGE!

Erin Weir at the Canadian economics blog Progressive Economics Forum explains it well:

For example, on corporate-owned life insurance, Moore notes that one cannot take out fire insurance on a neighbour’s house because doing so would provide a financial incentive to burn the house down. The apparent implication is that companies may be killing off their workers to collect insurance payouts. There is no evidence of such skullduggery, or at least Moore does not present any.

The real issue, which Capitalism fails to mention, is that corporations can use such insurance policies to avoid paying taxes. Whereas interest on money borrowed to pay premiums is tax-deductible, the resulting insurance payouts are tax-exempt. "Dead peasant" insurance is not a new and sinister corporate scheme to profit from death, but an old and sinister corporate scheme to drain the public treasury.

They avoid paying taxes on money used to pay the premiums, and the benefits are tax-free.

So, yes, it does cost the employees, and yes, everyone is being hurt by it. How? There are millions of such policies involving billions of dollars that are protected from taxation for no earthly reason than insurance industry clout with lawmakers.

continued>>>
http://www.dailykos.com/storyonly/2009/10/3/789259/-ABC-News-Stunned-To-Discover-Dead-Peasant-Insurance

[napi21]

1. Mike knows more about this than I do, but I thought you couldn't

buy an ins. policy on anyone without telling them first. If anyone can actually do that, don't you think it would be a very common practice acroll the country?

[jtrockville]

2. Prior to 2006, disclosure was voluntary

according to DeadPeasants.biz
http://deadpeasantinsurance.com/how-does-a-person-know-if-he-or-she-is-covered-by-a-policy/

[panader0]

6. I knew a guy several years ago that was a very heavy drinker

His buudy, figuring he wouldn't have long to live, took out a policy on him. I'm not sure who outlived who.

[LiberalFighter]

3. Why are insurance companies providing this type of policy?

[AllentownJake]

5. Because they make money off of it

Life Insurance is nontaxable income. A smart actuary at a company can come up with the formula of employees to ensure to make a profit (since the premiums are an expense and the income is non taxable) that the corporation makes by insuring its employees. Probably broken down by age, sex, and income. So even though you are spending more money as an expense on premiums you make it up with an nontaxable profit.

The insurance company makes out because they collect the premiums and take more money in than they took out.

[AJD48]

4. Conflict of interest?

So if the company goes cheapo on your health insurance, they save money by paying lower insurance premiums.
And if the cheapo health insurance leads to your death, they get money from the insurance company.
So there's financial motivation to provide cheapo health insurance.

But they'll provide quality health insurance for you because . . .
:rofl: that's the moral thing to do. :rofl:

[Enthusiast]

7. Hey! We live in the greatest

country on earth! And don't you forget it!

[HamdenRice]

8. It's true. A rich old person dying of cancer can shelter massive inheritance

It's not done that often but it goes like this. Insurance payouts are non-taxable.

So let's say you're 80 and have terminal cancer. No life insurance company will insure you, right?

Wrong. They'll insure you for the right price.

So let's say you want $1 million in life insurance payable to your kid. Because of your condition, the insurance company, knowing you're going to die, will charge you a premium of $1 million for a payout of $1 million.

You've just changed $1 million in taxable estate wealth to $1 million in non-taxable insurance payout.

That's an extreme example, but you get the idea.

The companies are just making non-taxable money betting on employees' deaths.