As we have stated in previous blogs, whole life insurance has been around for 200+ years. Over that period of time, many high-profile entrepreneurs have used their whole life policies to start businesses or as emergency cash funds during hard times.
Even though the idea of the Infinite Banking Concept was not around, these Entrepreneurs understood the value of the liquidity and guarantees that these contracts offered and used them to their advantage.
Who are some of these now-famous names?
Mr. Penney used the cash value as an emergency fund in the 1930s.
His company was doing great in the 1920s giving him great cash flow. With this cash flow, he bought real estate, stocks, and whole life insurance.
The market crashed in 1929 which led to the Great Depression. Penney borrowed against his cash value in order to make payroll and purchase inventory, which ultimately helped his business get through the Great Depression.
When Walt Disney presented his idea of a theme park called Disneyland to bankers, they could not see his vision being successful and would not loan him money. So instead of using traditional banks, Disney sold one of his houses and borrowed against the cash value of his whole life insurance to start Disneyland on his own.
He ended up creating one of the most successful brands in America that produce over $70 million in revenue a year.
In the early 1960s, Ray Kroc was working hard to expand his McDonald’s brand. Cash flow was tight and he was putting every dollar that he could back into the business. During these times of tight cash flow, Kroc borrowed against his whole life insurance cash values to pay key employees and fund marketing campaigns.
Today, there are more than 37,800 McDonald's restaurants worldwide, producing more than $21 billion of revenue a year (talk about the external rate of return on a policy).
Doris had an idea to create a business that would allow other people to put on in-home cooking demonstrations for their friends and families using her products. To start the business, Christopher borrowed $3,000 against the cash value of her whole life insurance policy.
Her business exploded and is a household name across the U.S., Pampered Chef. In 2002, Berkshire Hathaway purchased the company from Doris for a cool $900 million.
For you sports fans, the University of Michigan amended head football coach, Jim Harbaughs contract to include access to the cash value of a permanent life insurance policy. $14 million dollars of life insurance premium is to be paid over 7 years. Harbaugh will have access to that $14 million and more through withdrawals and policy loans, tax-free.
When Harbaugh passes, the University will recover its original $14 million investment from the death benefit.
What can be learned from all of these cases?
- Whole life insurance is not correlated to the market.
- It provides safety, liquidity, guarantees, and control to those who own it
- You can access the cash value for anything you choose to.
- There is no need to qualify for the loan and you have no restrictions for use
- Accumulating capital is a must to survive.
- You never know when your business or investment will fall on hard times, but being capitalized inside of a whole life insurance policy can give you the capital needed to work through the difficult times. Better yet, when you implement the IBC and take control of the banking function, you can eliminate the third parties breathing down your neck for payments!
- What the policy returns you on your cash value is not the point of the Infinite Banking Concept. Having total control of the banking function and opportunities that you’re presented with is.
- You and I and the life insurance companies can’t control the interest rate environment. When you have an opportunity to start a business or take on an investment opportunity though, having access to capital is critical.
- Life insurance can be used very creatively in business planning.
- Life insurance can be used to attract and provide compensation to key employees, and give liquidity/protection when it’s most needed (the passing of a key employee or owner). With proper planning and design, this not only protects the business but the family as well.
Contact us today to see if we are a good fit to help you work toward your financial goals!