What is the concept of dead peasants insurance

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Reference no: EM13262623

1-a company takes out, say a 100,000 life insurance policy on one of its lower-level employees. thae employee may or may not have to agree to the policy, depending on the state. if it is necessary to get employee approval the company may offer to pay a small amount- say $5000- to the family if the individual dies has left the firm or $1,000 if the individual has left the firm this payment to the emplyees family costs the employee nothing. so finding willing participants is not hard when worker approval is required.

2-to pay for policy the company borrows the entire premium from the insurance company that issues the policy usually the policies so only one up front payment is made the company also borrows the money needed to make the interest payment on lone so no cash would flow from the employees company to the insurance company while the policy is in force.

3- the companys bottom line is helped in two ways first increase in the paid -in cash value of the policy are reported as profit second the company recivese a tax-free death benefit when the empolyees dies even if he or she has long ago left the company.

4- the company uses the tax - free death benefit to pay off the policy loan and to mack the payment to the family if one was promised and then pockets the difference.

what do you think about the concept of dead peasants insurance? Dose this case present an ethical issue? if so to wich party ? if you could act as the ultamate authority in situation what would you do?

Reference no: EM13262623

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