Definition - What does Tontine mean?
A tontine is a financial plan in which a group of participants pool their financial resources and get shares or dividends from their investments but are not allowed to get back the ones used to raise the capital. When a participant dies, their shares are redistributed among the survivors, increasing the resources of each remaining individual. The last survivor gets all the resources invested into the plan.
Insuranceopedia explains Tontine
This scheme is attributed to and named after the Italian banker Lorenzo Tonti.
This financial plan is quite Darwinian insofar as the last surviving investor gets to take all the money. Some governments used to collect all the resources from tontine plans after last investor had passed away.
For many years, tontine was viewed as a life insurance system. However, it is hardly practiced today and is even illegal in some parts of the United States.