Tontine

What Does Tontine Mean?

A tontine is a financial arrangement where a group of participants pool their resources and receive shares or dividends from the investment, but are not allowed to reclaim the capital they contributed. When a participant dies, their shares are redistributed among the remaining survivors, increasing the share of each individual. The last surviving participant receives the entire pool of resources invested in the plan.

Insuranceopedia Explains Tontine

This scheme is attributed to and named after the Italian banker Lorenzo Tonti.

The plan is often considered Darwinian, as the last surviving investor claims all the money. In some cases, governments would collect the remaining resources from tontine plans after the last investor passed away.

For many years, tontines were regarded as a form of life insurance. However, they are rarely practiced today and are even illegal in some parts of the United States.