Companies are taking out life insurance policies on their employees, and collecting the benefits when they die

Employees at The Orange County Register received an unsettling email from corporate headquarters this year. The owner of the newspaper, Freedom Communications, was writing to request workers consent to take out life insurance policies on them. 

But the beneficiary of each policy would not be the survivors or estate of the insured employee, but the Freedom Communications pension plan. Reporters and editors resisted, uncomfortable with the notion that the company might profit from their deaths.

After an intensive lobbying campaign by Freedom Communications management, a modified plan was ultimately put in place. Yet Register employees were left shaken.

The episode at The Register reflects a common but little-known practice in corporate America: Companies are taking out life insurance policies on their employees, and collecting the benefits when they die.

Because company-owned life insurance offers employers generous tax breaks, the market is enormous; hundreds of corporations have taken out policies on thousands of employees. Banks are especially fond of the practice. JPMorgan Chase and Wells Fargo hold billions of dollars of life insurance on their books, and count it as a measure of their ability to withstand financial shocks.

Chosen excerpts by Job Market Monitor. Read the whole story at An Employee Dies, a Company Collects the Insurance – NDTVProfit.com.