Bank of America, JP Morgan Chase, and other big banks have bought bank-owned life insurance policies, according to a statement from the Clearman Law Firm. Wells Fargo, Citi Group and Wachovia were also mentioned. With bank-owned life insurance, a bank names itself as the beneficiary of life insurance policies covering its employees, said the firm.
Typically, a bank will buy a policy on a smaller group of officers and directors, using the cash value and proceeds to recoup benefit expenses.
Almost half of all banks in the US own bank-owned life insurance policies, which amounts to around $120 billion in value. Many bank employees “have been laid off, and yet the bank still stand to benefit financially when those employees die,” said attorney Scott Clearman.
Wal-Mart got in trouble for this a few years ago. In fact, it’s a common corporate practice. While it seems distasteful, the truth is it’s just a form of investment. The employee on whom the policy is taken out is not exploited or endangered.
It would still be nice if employees could opt out, however.