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Corporate-owned life insurance policies, sometimes referred to as employer-owned life insurance, involve a company taking out life insurance policies on its employees, with the company as the beneficiary. This means that upon the death of the insured employee, the company receives the death benefit. These policies can cover a broad range of employees, from executives to lower-level staff. For instance, a large retailer might purchase life insurance policies on thousands of its employees, aiming to offset costs associated with employee turnover or to fund employee benefit programs.

The rationale behind such practices often lies in the potential financial benefits for the company. Death benefits can be used to cover expenses related to recruiting and training replacements, cushion against lost productivity, or contribute to overall profitability. Historically, these policies have been justified as a way for companies to protect themselves against financial losses stemming from the unexpected death of key personnel or to provide funding for employee benefits. The practice has, however, generated controversy due to ethical concerns surrounding profiting from an employee’s death and the potential for conflicts of interest.

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