Life Insurance: A Financial Legacy That’s Stood the Test of Time
- ironsharplifellc
- Oct 12
- 4 min read
Life insurance, in its simplest form, is a contract in which an insurer promises to pay a death benefit to beneficiaries in exchange for premiums, but over the centuries it has grown in sophistication — especially in its cash-value and dividend-paying features.
From its humble beginnings centuries ago to its modern-day role in wealth creation, life insurance has remained a cornerstone of financial security — protecting families, funding businesses, and even serving as an investment vehicle through every economic storm.
When it comes to stability, very few financial tools can match the enduring strength of this product.
🕰️ A Brief History of Life Insurance
Life insurance traces back to the 1700s, when early pioneers like the Amicable Society for a Perpetual Assurance Office in London began pooling resources to protect families from financial hardship. At this time, life insurance was a niche, sometimes viewed skeptically (even as a form of gambling).
By the mid-1800s, America saw the rise of companies such as National Life Group, New York Life, Americo, MassMutual, Pan-america, Prudential, United of Omaha, and John Hancock — many of which remain industry leaders today.
These early mutual insurers were founded on simple but powerful principles: shared risk, guaranteed protection, and disciplined reserves. Policyholders didn’t just receive protection — they shared in the profits through dividends, a feature that still exists today in participating whole life insurance.
At Iron Sharp Life, we only work with mutual companies that pay dividends. See Dividends: The Hidden Wealth Builder in Life Insurance for more information.
💪 Proven Through Every Economic Crisis
Life insurance has quietly outlasted every major economic downturn in history — still paying dividends, honoring death benefits, and maintaining cash values even when banks and markets were collapsing.
Here are three key moments when life insurance proved its resilience:
The Great Depression (1929–1930s) - While banks failed and unemployment skyrocketed, mutual life insurers continued paying claims, dividends, and policy loans. Many business owners — including J.C. Penney — used their life insurance cash value to stay afloat and make payroll, more on that below.
One of the mutual insurers we work with, National Life Group, even paid families after losing loved ones during the tragic crash of the Great Titanic.
World War II (1940s) - During wartime economic instability, insurers remained solvent, paying billions in benefits while also funding war bonds that helped stabilize the U.S. economy.
The 2008 Financial Crisis - Even as major investment banks collapsed, mutual life insurance companies maintained strong balance sheets and continued to credit policyholders with dividends. The safety and guarantees of permanent life policies became even more appealing to cautious investors.
In 2008, for example, Guardian Life declared a record 7.3 % dividend interest.
These examples show that permanent life insurance has, over more than a century, maintained its contractual promises even through profound financial stress.
🌱 Evolving Beyond Death Benefits: The Rise of Living Benefits
Life insurance has evolved far beyond its original purpose of paying a death benefit. Modern permanent life insurance now offers living benefits that policyholders can use while they’re still alive.
Cash Value Growth – A portion of your premium accumulates tax-deferred, allowing you to build a personal financial reserve.
Policy Loans and Withdrawals – Access your cash value for opportunities or emergencies without credit checks.
Accelerated Living Benefits – Receive a portion of your death benefit early if you’re diagnosed with a chronic, critical, or terminal illness.
Dividends – With participating policies, you may receive annual dividends that can be reinvested or withdrawn.
Riders / optional benefits: Modern policies often include or allow riders like accelerated death benefit (advance a portion of the death benefit in case of terminal or chronic illness), waiver of premium (if disabled), long-term care riders, etc.
Universal / Variable life structures: These allow flexibility in premium payments, adjustable death benefit, and/or subaccounts tied to investment performance.
In short: life insurance is no longer just insurance — it can be a “banking” tool, a tax-advantaged vehicle, and a source of liquidity.
💡 Famous Examples: How Life Insurance Helped Build Empires
Many of the world’s most successful entrepreneurs used life insurance to fund their dreams when traditional banks turned them away.
Walt Disney – Borrowed against his life insurance policy to help fund Disneyland when no bank would lend him the money.
Ray Kroc (McDonald’s) – Used his policy’s cash value to pay key employees and cover business expenses during early expansion.
J.C. Penney – During the Great Depression, accessed his life insurance cash value to keep his stores open and pay his workers.
These stories prove that life insurance isn’t just about protection — it’s about possibility.
🏦 How Banks Profit from Life Insurance: The Truth About BOLI
Here’s a fact few people know: Banks are some of the largest purchasers of life insurance in the world.
They call it BOLI, or Bank-Owned Life Insurance. Banks use these permanent life insurance policies as a stable, tax-advantaged asset class. The cash values inside BOLI grow tax-deferred, and the death benefits are generally tax-free — the same advantages individuals enjoy.
Instead of keeping all their cash in low-yield accounts, banks use your deposits to purchase life insurance policies that earn far higher returns.
As of 2024, U.S. banks reported over $205 billion in life insurance cash value on their balance sheets.
Here are a few examples:
Comments