In nearly a decade of war in Afghanistan and Iraq, 5,620 Americans have died. Survivors of these fallen heroes are entitled to a life-insurance payment and the government uses a private company to handle it. What happened to the mother of 24-year-old Ryan Baumann of Great Mills, Maryland when she tried to collect serves as a lesson to every military family.

According to a Bloomberg Markets Magazine investigation, insurance companies have been profiting off of the death-benefits of fallen heroes.
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"They're able to create quite a float for themselves. They're able to earn the difference between the small interest rate that they pay to the survivors and the larger rate that they're able to make by keeping this money in their corporate investment account," Evans said.

In fact, in 2008 when Cindy Lohman's statement said she was earning less than one percent interest on her Alliance Account, regulatory filings show Prudential was earning almost 5 percent on its corporate account.

"They figured out a way to create these retained asset accounts, they figured out a way to hold onto that money and actually turn death into a profit center," Evans said.

Evans says the practice of pooling and profiting from death benefits is surprisingly common - and extends well beyond the military.

"We were able to determine that there's $28 billion in a million accounts at more than 120 insurance companies across the U.S.," Evans said.

While Prudential's packet boasts words like "control" and "security" in big bold letters, you'd have to read the fine print to find out that Alliance Accounts are not insured by the FDIC.

"They're increasing their profits on all of our children's death benefits. It's sad," Lohman said. "Doing it in a way that puts the money at risk."

They may be turning profits, but at least one veterans' advocate says, any insurance company doing this is "morally bankrupt."

"This is outrageous, that a large insurance company is taking advantage of families at the very time that the American public expects that they be provided everything that they need," said Paul Sullivan of the Veterans for Common Sense.

Outrageous perhaps, but is it legal?

"It doesn't appear to be criminally unlawful," said Adam Scales, Associate Law Professor, Washington and Lee University. "But, it's likely to be civilly unlawful and raises some difficult regulatory boundary questions."

When a policyholder dies, Prudential and MetLife inform the beneficiaries of their death benefit and issue them a "checkbook" that can allegedly be used to draw the money, in whole or in part, from an interest-bearing bank-style account. In the meantime, the money—$28 billion of it, according to Bloomberg—actually stays in the firms' general kitty, earning them interest rates around 5 percent, while they pay the survivors far less—anywhere from 0.5 to 3 percent.

Not only that, but the checks aren't real—they're IOUs. Cindy Lohman found that out after her 24-year old son, Ryan, died in an IED attack in Afghanistan. After grieving for six months, she tried to buy a bed using the checkbook given to her by Prudential, which held her $400,000 death benefit. That check—and another she tried to use at Target—were rejected by the retailers.

"I'm shocked," she told Bloomberg, crying as the insurance company's scheme was explained to her. "It's a betrayal. It saddens me as an American that a company would stoop so low as to make a profit on the death of a soldier. Is there anything lower than that?"

Prudential is contracted by the Department of Veterans Affairs to handle its life-insurance needs, and Lohman was given what the firm calls an "Alliance Account." Except it's not a standard checking or savings account, and it may be illegal: New Deal-era federal banking regulations bar companies from holding deposits unless they're authorized by the government. What's worse, since the insurers aren't sanctioned to hold deposits, the survivors' benefits aren't insured by the FDIC: If the insurance company faces a run on its deposits, or otherwise goes belly-up, it could potentially take the parents' and spouses' money with it.