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his widow.
    The letter contained a check for nearly $1.6 million. But it was payable to Amegy Bank, not to Johnson’s heirs. The check was just one installment in a $4.7 million life insurance policy that Johnson’s former employer had taken out on him—the company was cashing in on his death.

JANITOR INSURANCE
    For decades it has been common for companies large and small to take out “key-person” life insurance policies on company presidents and other valuable employees who are difficult to replace. Dan Johnson was hardly indispensable: The bank proved that when it demoted and then fired him after he got sick. By then, it was too late for him to buy his own insurance. But it wasn’t too late for Amegy Bank: By pooling him with 40 other executives, the bank was able to take out a multimillion-dollar policy on him after he’d been diagnosed with terminal cancer.
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    In years past, it would not have even been possible for Amegy to take out a policy on Johnson because the bank had no “insurable interest” in him: It didn’t stand to lose much if he died. But thanks to years of intensive lobbying by insurance companies, all that began to change in the late 1980s. In many states, regulations were loosened to allow companies to take out policies on any employee, no matter how lowly or unimportant, often without their knowledge or consent. Such policies became known inside the insurance industry as “janitor insurance” or “dead peasant insurance.”

DEATH AND (NO) TAXES
    Dead peasant policies had a lot to offer: The payment balance grew, tax-free, until the insured party died, and the after-death payout to the company was also tax-free, just as if it had gone to a widow or an orphan. If the company borrowed money to buy the policy, or borrowed against the policy’s cash value, the loan payments were tax deductible. Under certain circumstances, a corporation could reduce its taxes by more than a dollar for every dollar it spent on dead peasant insurance.
    With no requirements for disclosure, either to the employee or to corporate shareholders, it’s difficult to know how many policies were taken out by the time the practice peaked in the mid-1990s. According to one insurance industry estimate, as many as six million American workers may have had policies taken out in their name.
    Keeping track of employees after they quit or were fired was not a problem; all a company had to do was conduct quarterly “death runs” of insured employees’ Social Security numbers to see if anyone had died, then collect death certificates from the next of kin and forward them to the insurance companies to cash out the policies.

ARE YOU DEAD YET?
    Dead peasant policies created some appalling and cynical conflicts of interest: What’s the incentive to provide a safe work environment if you collect a $400,000 payout every time one of your hourly employees falls off a creaky ladder or drops dead from a heart attack loading a big-screen TV into a customer’s car? Why should a company improve its prescription drug coverage if doing so would make its insured employees live longer?
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    Dead peasant policies may actually have cost some workers their lives. In the early 1990s, Texas’ Diamond Shamrock convenience-store chain upgraded security at its stores with bulletproof glass and other improvements, while a competing chain took money that could have been used for such upgrades and insured its store clerks for $250,000 each instead. Between 1991 and 1995, Diamond Shamrock had one on-the-job fatality; the competitor had nine.

THE PARTY’S OVER?
    The IRS began to disallow some dead peasant tax deductions in the late 1990s, and Congress and state legislatures began closing the loopholes. And in many states,