It ain't pretty being easy... (soopageek) wrote,
It ain't pretty being easy...
soopageek

janitor's insurnace

Damnit, I did it again. Why is it that it takes someone's interesting or provocative thought for me to get all wordy?

This comes out of esquemeauxpi's journal. He brought up the subject of corporate life insurance policies on its employees and the fact that 1) they can do it without the employee's knowledge, 2) they can maintain this policy even after the employee leaves the company, and 3) that the deceased's family receive no portion of the benefits. The common term for this type of insurance is "janitor's insurance" or "dead peasant's insurance".

My recent foray into Ayn Rand's Capitalism probably influenced my comment quite a bit, but the fundamental aspects of insurance and its practice seems very basic to me, so I dissented with the reaction of most of the commenters.


I first read about it in Moore's book as well. And I've heard it mentioned a time or two, but I really don't understand what the big deal is. I guess it may seem a little callous for an employer to view its employees as an asset, but in reality, this is exactly what an employee is. Companies have to fund benefits programs, pay wages, foot the bill of education and training, and provide government regulated work environments that meet a certain criteria of safety and health for their employees. At what levels an employer provides these things will determine its relative strength in attracting, developing, and maintaining a productive work force. It seems reasonable to me to insure one's assets and/or investments.

Insurance is nothing more than a sophisticated form of gambling. One party bets the other that something will or will not occur at or within a given time. Every time you pay your personal life insurance policy you are basically betting the holder of your policy that you will die between this payment and the next one. The policy holder, however, is willing to accept this risk, since, based largely on your age and sometimes medical exams, that will not likely happen for some time and they can take your payment and invest it, and grow capital beyond what they have agreed to pay you when you do kick off. I don't personally have a philosphical problem with two consenting parties willing to gamble on the outcome of some event, whether it be a football game or when a third party will shed their mortal coil. I don't see how the third party being aware of this practice affects anyone involved nor do I see any reason why anyone affiliated with the third party should be entitled to any proceeds gained from the endeavor. They were not involved with the financial risk.

That, anyway, is the underlying philosophy. Which I have no qualms with. The bigger picture, however, is whether people who already have disposable income, whether it be an individual or large corporations should be entitled to tax benefits on insurnace investment income. Basically, this is an advantage for the rich/middle-class AND the insurance companies because, what incentive do the rich have in taking out life insurance? Couldn't their money make them more money under conventional investments rather than in gambling on an insurance premium? And, if the rich aren't taking out life insurance, how much money is to be made off of the working-class, which, typically, is a shadier proposition for a life insurance company when comparing life expectancies and class. Naturally, the argument can be made that this very system is what allows life insurance companies to provide reasonable insurance premiums to everyone, by covering losses incurred in some places from gains made in another.

Hence the tax breaks for insurance investment income. It, basically serves two purposes - to prop up a particular sector of industry (insurance companies) and provide tax breaks for people who need it least (the rich and middle-class) - and begs the larger question: should the individual and corporate tax codes be used to interfere with the consensual, economic undertakings of people in a market economy?
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