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Corporate-owned life insurance (COLI), also known as company-owned life insurance, is a life insurance policy an employer takes out on a highly valuable employee, like a founder. If the employee dies, the company gets the death benefit.
Because of past abuse of COLI policies, companies now need approval from employees to insure them. A company-owned policy is especially important if your business can’t replace key executives quickly or easily.
Corporate-owned life insurance is a life insurance policy a company takes out on an employee
These policies protect companies from profit losses after top executives die
Because of abuses of corporate-owned coverage in the past, it’s also called dead peasant insurance
Regulations now require your consent to be part of a corporate-owned policy
Companies use COLI to replace lost profits or expenses if one of their top executives dies. There are two common types of corporate-owned life insurance: key person insurance and split-dollar life insurance.
Key person insurance insures top executives or other highly skilled employees whose deaths would cause a financial loss to the company. Key person policies are usually term life insurance, but can be permanent life insurance.
The premiums are paid by the company. If the employee dies, the payout goes toward the cost of hiring their replacement and lost business due to their death.
Split-dollar insurance is an agreement where an employer and an employee share the cost and/or proceeds of a policy that has a cash value feature. It’s sometimes offered as an executive employee benefit.
Unlike key person insurance, the employer and the employee’s family both benefit from the policy’s payout or cash value. The exact breakdown of how each employer splits the cost and benefits with their employee varies.
The nickname dead peasant insurance started in the 1980s, when several large companies — including Walmart, Procter & Gamble, Nestle, and Winn-Dixie — bought corporate-owned life insurance policies on thousands of regular employees. 
This was done for tax benefits, not to profit from the deaths of employees. But because companies did it without telling employees — and raked in millions through tax breaks and death benefits — critics started calling it dead peasant insurance.
The term references the Nikolai Gogol novel, Dead Souls, in which the main character buys dead serfs from landowners to use as collateral for a massive loan in a get-rich-quick scheme.
Dead peasant insurance is not the same as group life insurance, which is an employee benefit where the company pays some or all of the premiums for your own policy.
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It’s very unlikely you’re insured under a COLI policy without knowing it. After media attention and publicized lawsuits exposed employers that used dead peasant insurance, the 2006 Pension Protection Act put new regulations on corporate-owned policies. 
Today, if your employer wants to get life insurance coverage for you and name themselves as the beneficiary, they must follow these guidelines:
You must be notified and give written consent
COLI can only be taken out on the top 35 percent of highest-paid employees
Your employer cannot punish you for rejecting the plan
Corporate-owned life insurance is not illegal as long as an employer follows these guidelines. If you’re not sure if you agreed to a corporate-owned policy before, check with your HR department or benefits manager — they’re required to let you know.
If you’re a business owner, you may need a company-owned policy in addition to a personal policy for your loved ones. An independent insurance broker can help you find the right combination of life insurance to protect your family and your business.
Dead peasant insurance is a nickname given to corporate-owned life insurance after major companies profited from policies they bought on employees without telling them.
Company-owned life insurance is legal, but highly regulated. Today, an employer can’t take a policy out on you without your knowledge and consent.
A company pays some or all of the premiums for a policy on a highly valuable employee (with their approval). The business gets the payout if the employee dies.
Businesses buy life insurance for employees who would be expensive to replace or whose death would cause profit loss, like a founder or CEO.
Your benefits administrator is required to tell you if you are covered by a company-owned life insurance plan.
AD&D insurance only pays out the death benefit if you are seriously injured or die from an accident.