A worker’s value to his or her employer can be measured in many ways, from productivity to skills. But a lesser-known way a company can profit from its workforce is by taking out life insurance policies on employees and cashing in after they die.

From newspapers to banks, hundreds of the largest businesses in the U.S. have purchased life insurance policies on their workers, with about $1 billion worth of new coverage going into force each year.

In fact, about one fifth of all life insurance being taken out is by companies hoping to reap cash from their employees’ demise.

This ghoulish strategy has been adopted by the likes of The Orange County Register and many of the nation’s largest banks, like JPMorgan Chase, Wells Fargo and Bank of America.

“Companies are holding this humongous amount of coverage on the lives of human beings,” attorney Michael Myers, who has filed class-action lawsuits against several companies with such policies, told The New York Times.

Defenders of this practice claim the businesses are entitled to take out the policies in order to cover long-term health care, deferred compensation and pension obligations. But the amounts of the policies are staggering, making some wonder what motives lay behind them.

“Life insurance is one of the ways of strengthening the long-term health of the pension plan and ensuring its ability to pay benefits,” Aaron Kushner, chief executive of Freedom Communications, owner of the Register, said in an interview.

The “cash surrender value,” the amount policyholders can receive before a worker dies, of BofA’s policies is at least $17.6 billion. At Wells Fargo it’s $12.7 billion, and at JPMorgan Chase it’s $5 billion, according to the Times. Banks can use those numbers on their balance sheets as “Tier 1 capital,” a measure of an institution’s strength.

-Noel Brinkerhoff

To Learn More:

An Employee Dies, and the Company Collects the Insurance (by David Gelles, New York Times)

“Ghoulish” OC Newspaper Owner Takes out Life Insurance on Employees (by Ken Broder, AllGov California)