What does the term “dead peasant insurance” mean?
[social_share]If a company has “dead peasant” insurance on an employee’s life, then the employee should not expect any benefits to go to his or her family from this policy.
The term “dead peasant insurance” is a common name for the “key man insurance” that a company often takes out on its key staff, those whose future employment with the firm is paramount to its future. Without these key staff members, the firm could not continue developing its products or managing its relationships with important clients. Without these specific employees, the company could not succeed.
While a company can offer better terms and conditions to its employees to discourage them from defecting to competitors, it cannot by and large offer inducements to stave off death. Instead, if the employee dies the company may need capital to buy some breathing room while it finds a successor, and this is the purpose of key man, or dead peasant, insurance.
While not historically accurate, the term dead peasant insurance comes from the idea that if a lord were to lose one of the people who worked his land, he may receive an insurance payout but the family would not. This type of life insurance was never actually available in feudal England, because there was no life insurance until England stopped being a feudal country. There were however some policies similar to this available for Russian aristocrats, to guard against the loss of serfs.
It’s important to realise that this insurance policy is taken out for the benefit of the company and not the employee nor his or her family. This is perfectly legitimate, and the very fact of the policy’s existence is a good indication of the employee’s importance to the firm, providing a bargaining foundation for pay and benefit increases as well as better conditions.
However, the family of the employee is not benefitted by this policy, even if the employee has since left the company. Life insurance must be purchased separately to benefit the family. Also, it’s important to check that income tax is not affected by the insurance, as it may be taxed as an employee benefit.
Sometimes it’s possible to purchase the dead peasant insurance policy from the company when leaving its employ. As the life insurance premiums remain the same throughout the term, this can be a good deal. But remember to change the beneficiary.
