Noteboom The Law Firm

Insurance Companies Making Money on Soldiers’ Deaths

August 2, 2010 - It is a questionable policy, at best. All life insurance for the Department of Veterans Affairs (VA) is handled by Prudential Financial. When soldiers are killed, their survivors are sent a checkbook allowing them to draw on an interest bearing account in which the soldiers' death benefits have been deposited; a retained-asset account.

What survivors are not told, however, is that Prudential is keeping this money in their general investment account. This account allows Prudential to not only earn higher interest on the money than what they are paying out to the survivors, but Prudential also keeps the investment income they earn from the money.

Survivors are given two options: a lump sum payout or 36-monthly payments. Almost everyone takes the lump sum but they are not issued a check with the money. What they are given is a checkbook. The face of the check is set up in such a way so as to appear that JPMorgan supports the accounts, which would lead a person to believe the account was FDIC insured. Using these retained-asset accounts allows Prudential to circumvent numerous regulations.

Because the money is not kept in a bank it is not FDIC insured. Because laws applying to fund companies do not apply to Prudential, Prudential is not required by the SEC to give survivors a prospectus of investments. Prudential then earns gains on their investments from the death benefits.

As long as there is money in the account, Prudential can use that money to make investments. As long as there is no regulatory or legal intrusion into these practices, companies like Prudential will continue to profit off the deaths of U.S. soldiers.