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Unlocking the Potential of Cash Value Life Insurance

How to Use cash value life insurance as Collateral for a Self-Liquidating Loan.

Article by Sam Izad




Here are a few examples of well-known companies that have reportedly used life insurance policies as collateral for loans or financing:


  1. McDonald's: According to some sources, Ray Kroc, the founder of McDonald's, used his life insurance policy as collateral for a loan to purchase the original McDonald's restaurant from the McDonald brothers. This allowed Kroc to access financing without having to give up equity in the company.

  2. Coca-Cola: The founder of Coca-Cola, Asa Griggs Candler, reportedly used the cash value of his life insurance policies to help finance the company's growth in the early 1900s.

  3. Walt Disney: There are reports that Walt Disney used his life insurance policy as collateral for a loan to help finance the construction of Disneyland in the 1950s.

  4. J.C. Penney: James Cash Penney, the founder of J.C. Penney, used life insurance policies to help fund his company. In the company's early days, Penney borrowed money from friends and family to start the business and used his life insurance policies as collateral for loans. Later, as the company grew and became more successful, Penney used a unique financing strategy known as the "Self-liquidating loan" to further fund the business. This involved taking out a loan using the company's assets as collateral and then using the loan proceeds to buy life insurance policies for the company's executives. When the executives passed away, the death benefit from the policies was used to pay off the loan. This allowed Penney to access financing for the company without diluting his ownership stake or selling equity.


It's important to note that using life insurance policies as collateral for loans or as a means of financing can be a complex strategy requiring careful planning and execution. It's not necessarily appropriate or feasible for all businesses or situations, and business owners should consult with financial professionals before using life insurance policies in this way.

Starting or expanding a business can require a significant amount of capital. While there are many ways to access financing, from traditional bank loans to venture capital funding, these options may not always be available or appropriate for every business owner. One alternative financing strategy that some entrepreneurs have used is to leverage the cash value of their life insurance policies.

Cash value life insurance is a type of life insurance policy that includes a savings component in addition to the death benefit. As premiums are paid into the policy, a portion is set aside in a cash value account that grows over time. The policy owner can access this cash value in various ways, including taking out a loan against the policy or withdrawing funds from the cash value account.

Here are some potential benefits of using cash-value life insurance to fund your business:


  1. Flexibility: Unlike traditional loans or equity financing, using cash value life insurance to fund your business gives you more control over the financing terms. You can set the repayment terms, interest rate, and collateral requirements, and you don't have to give up equity in your company to access the funding.

  2. Low cost: Depending on the specifics of your life insurance policy and the terms of your loan, borrowing against your cash value account can be a relatively low-cost financing option. The interest rate on a life insurance policy loan is typically lower than other types of loans, and there may be no additional fees or charges.

  3. Tax advantages: Depending on the specifics of your policy and the loan, using cash-value life insurance to fund your business can have tax advantages. Loans against a life insurance policy are not typically taxable, and any interest paid on a loan may be tax-deductible.

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