Corporate-owned life insurance (COLI), is life insurance on employees‘ lives that is owned by the employer, with benefits payable either to the employer or directly to the employee’s families. Pejorative names for the practice include janitor’s insurance and dead peasants insurance. When the employer is a bank, the insurance is known as a bank owned life insurance (BOLI).
In 1992, Felipe, then 29 years old, died of complications from AIDS. He never bought life insurance, so his family received no death benefit. But CM Holdings Inc., then the parent company of Camelot Music, did. It received $339,302.
Like hundreds of other large companies, CM Holdings took out life-insurance policies on thousands of its employees, with itself as the beneficiary. Most workers covered this way don’t know it, nor do their families.