IMAGINE your father dies while in the employ of a reputable company and you later find out his boss took out a life policy on him but is not sharing the payout with you.

Maria Kobo of Mamelodi has accused Plumbsan Dormakorp Vyftien Pty Ltd, trading as Plumbsan, of taking out a policy on her husband's life and pocketing the money.

Kobo's family had to survive on hand-outs from caring neighbours and government grants of R1,000 since 2006.

She claims Plumbsan had encouraged her husband to take out policies when the company employed him.

At first he took out a policy with Liberty Life, but later his employer transferred the policy to the Momentum Group, Kobo said.

Plumbsan paid the monthly premiums, Kobo said.

"No deductions were shown on his pay slip or his bank account," Kobo said.

She said when her husband died his employer offered to help her lodge a claim at Momentum.

The Kobo family should have received R237,262, she said.

Kobo said Plumbsan asked her to forward her marriage certificate and the birth certificates of her five children .

"I was pleased with the help because it took no time to get a funeral benefit of R5,000 to bury my husband," Kobo said.

Two months later Kobo received a further R20,000 and then nothing, she said.

"In 2008 I went to enquire about the balance and was told it was invested for us and we would receive the interest," Kobo said.

"I received interest of R1,500 for the whole of 2008 and then it stopped," she said.

She claims that this year the employer changed his story and told her that the Momentum Group never paid them the death benefit.

In May this year Kobo found that her husband's employer had not told her the truth when they said Momentum never settled her death benefit claim.

A letter in Sowetan's possession from the Momentum Group, written to her in May, states that Plumbsan had taken a Group Life Assurance Policy covering her husband's life.

"The employer was the policyholder and on the death of her husband the benefit to the amount of R235,320 became available for distribution," stated the letter.

"The condition of payment allowed Momentum to pay the benefit to the policyholder or such other person as the policyholder..."

The plumbing company asked that the money be paid to Kobo's wife, reads the letter.

But this amount never reached Kobo.

"The idea that the company would insure lives and then not share the benefits with the families, is just madness, the widow said," Kobo said. "If this is legal, then it is creepy."

In overseas countries these "dead peasant insurances" are frowned on. Momentum has not confirmed whether it was the same here or not.

• Dead peasant insurance is sometimes used as a shorthand reference for life insurance's rank-and-file employees and name the company as the beneficiary.

This means that the company receives the life insurance benefits when the covered employees die.

This insurance might also be called corporate-owned life insurance or COLI for short.

How did the name "dead peasant insurance" originate?

An American company called Winn-Dixie's Stores bought life insurance policies for about 36000 of its employees without their knowledge or consent. The company then named itself as beneficiary.

Dead peasants insurance pays the employer a secret, tax-free windfall when an employee dies.

The insurance brokerage firm that placed the policies prepared two memorandums describing the deceased employees as "dead peasants".

These memorandums were part of the court's record in a lawsuit in which the US court of Apppeals for the eleventh circuit held that Winn-Dixie's policies were a sham transaction for federal income tax purposes.

Lerato Mametse of the Momentum Group confirmed that the late Noah Kobo belonged to an Umbrella Pension Fund, under participating employer Dormakorp 15 trading as Plumbsan.

Mametse also confirmed that Momentum paid a funeral benefit of R5,000.

A net of tax death benefit from the pension fund of R20,866.23 was paid to the surviving spouse.

"A death benefit from a separate group life policy funded by the employer of R237,262,28 was paid into unapproved Group Life Assurance benefit as per the employer's instruction," Mametse said.

She said an Unapproved Group Life Assurance policy is a policy where the employer pays the premiums and then instructs Momentum on how the benefits should be paid, as stipulated in the rules of the policy.

Mametse said Momentum was aware of a dispute between the employer and the spouse and would suggest that this be taken up directly with the company or employer.

She also advised Kobo to approach the Ombudsman for Long-term Insurance.

Adrian van der Merwe of Plumbsan said he and a certain Van Niekerk were able to discuss the matter only this Monday.

"We were unfortunately unable to meet your deadline, but will endeavour to put this matter to rest as soon as possible' read Van der Merwe's e-mail.

Van der Merwe did not respond, though Consumer Line had given him until Monday afternoon to do so.