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Washington State Limits Janitor Insurance

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Employers in Washington state will no longer be able to own life insurance policies on their rank-and-file workers without the workers’ permission.[@@]

Under a new law signed by Gov. Christine Gregoire, corporate-owned life insurance, often called “janitor” or “dead peasant” insurance, is restricted.

With this type of policy, an employer buys corporate-owned life insurance on workers, often without telling the workers, and names itself as beneficiary. When an employee dies, the employer collects the death benefit, even if the employee has left the company.

The law requires employers to obtain written permission from the employee before it buys life insurance on the employee’s life. Employers must also provide written notification to the employee within 30 days of buying the insurance .

The new law does not affect the right of employers to buy life insurance on key employees, with the company as beneficiary, when the employee is vital to the company, according to the state Office of the Insurance Commissioner.