Financial Accounting Blog

Thursday, January 22, 2004

Company Life Insurance This article/video discusses how companies are now taking out Life Insurance policies on its employees. While originally meant for top-level executives, companies are now using this as a tax-free way to fund other employee benefits.
When Joel St. John died, his wife learned that the grocery store chain where he worked as a butcher was the beneficiary of his life insurance policy, not his family. The company made off with $100,000 of his money and the family only received $17,500.

Currently 25 percent of Fortune 500 companies have such policies, including Disney (DIS), Dow Chemical (DOW) and the parent company of the Fox News Channel, News Corporation (NWS). One firm is even making 12 percent of its bottom line from employee death benefits.

But advocates of the company-owned life insurance policies say politicians and lawyers are vilifying the practice, and the money is often used to fund other employee benefits.