Jim Harbaugh’s $4 Million Life Insurance Strategy Explained

Ever wonder if the rich and famous use life insurance? https://www.youtube.com/watch?v=rWNYEK6iuio Life insurance is a private asset. That’s why you don’t hear a lot about it in the public arena. But wouldn’t you love to hear how life insurance is being used in the lives of people whose names you’d recognize? Today, we’re talking about some life insurance that’s as close to the spotlight as you get—coach of the Michigan Wolverines, Jim Harbaugh, agreed to have his compensation package include life insurance.  Today, we’re going to talk about one case where life insurance was used as executive deferred compensation that benefits both the employee and the employer. So, if you’d love to see how other people are using life insurance, join us for the conversation! Table of contentsWhy Don’t More People Talk About Life Insurance?Jim Harbaugh’s Life InsuranceBenefits for Harbaugh’s HeirsA Creative Way to Use Life InsuranceA Split-Dollar ArrangementOther Successful Uses of Permanent Life InsuranceBook A Strategy Call Why Don’t More People Talk About Life Insurance? Well, likely because it’s such a private asset. Whole life insurance shields policy owners from creditors, is not reported to the IRS, and it doesn’t have to be included on FAFSA forms. In fact, it can’t be used in lawsuits either.  The privacy afforded by whole life insurance is so valuable, and yet it also means that unless someone talks about their own experience, there’s no way to Google how much insurance someone has or doesn’t have.  Add to that the fact that many people still believe whole life insurance is only useful for death benefits or that it’s too expensive or complicated to understand. This combination of legal privacy and public misunderstanding is why many people (even professionals) rarely talk about life insurance in depth. But it’s not just for retirees or families. Whole life plays a major role in executive compensation packages, often structured to reduce tax exposure or retain top talent. By its nature, insurance is private, which means people who have it tend to be private about it. Now that someone in the spotlight—Jim Harbaugh—has publicly spoken about life insurance, it’s a little easier to put it into context for you.  His life insurance strategy is a perfect case study in how this under-the-radar financial tool gets used at the highest level. Jim Harbaugh’s Life Insurance Not only is Jim Harbaugh being paid $5 million a year as a coach, but the Jim Harbaugh life insurance package negotiated with Michigan adds another layer of long-term value. The university has loaned him $4 million to start a policy, with an additional $2 million a year for the following five years. This type of agreement is known as a split-dollar arrangement, which is commonly used in high-level executive contracts to offer long-term incentives and minimize tax liabilities. The ability to leverage his policy means he can take loans without incurring income tax. And as long as he keeps his policy in force, he does not have to repay the loan from the school until he passes on. A portion of the death benefit will pay it off.  In practical terms, this gives Harbaugh tax-advantaged access to cash throughout his life while still leaving a sizable benefit behind. This is what we call a win-win situation—where the school has a near-guarantee to receive their money back, they’ve secured Harbaugh as a coach, and Harbaugh gets the benefit of a policy.  Of course, there are stipulations to this contract. If Harbaugh leaves his coaching position before the contract is up, he will have to repay the premiums loaned to him upon termination or resignation.  This life insurance strategy isn’t unique to football coaches. It’s a smart approach for any executive seeking long-term financial security and flexibility without giving up liquidity today.  Benefits for Harbaugh’s Heirs Not only will Harbaugh benefit,