Who Used Whole Life Insurance as their own Bank – JC Penney
Neil Smith - Sep 29, 2021
During the great depression James Cash Penney the owner of JC Penney stores was able to lend himself cash from his whole life policy to buy inventory and pay salaries to keep his stores open during the Great Depression
The first JC Penney store was opened in 1902. During the 1920s James Cash Penney owned a number of very profitable department stores. Before the pandemic, you may have visited one of his stores in Minot, ND, Bismarck, ND and Rapid City, SD.
In the 1920s, department stores were doing well. Penney decided to diversify by buying a stock portfolio and real estate in Florida. The other asset he purchased was a large whole life insurance policy with a conservative steady growth rate. He bought it more for the death benefit rather than as a means to protects his family and the company.
In 1929, the Great Depression hit when the stock market crashed. Real estate values in Florida dropped and the banks failed by the dozens. Thanks to the whole life policy Penney purchased on himself, he was able to take a large loan against the cash value to save his business and still have a death benefit for his family.
By putting that cash loan into his business from his whole life policy he was able to purchase inventory to sell. Most importantly, he was able to continue paying salaries to his employees to keep the doors open long enough to recover.
Although it took years for the stock market and real estate values to recover, his chain of department stores survived. JC Penney supported his family and many others because his business provided a way to make a living during lean times.
His company eventually went public and was a multi-generational legacy due to that whole life insurance policy. This was due to there being stricter reserve requirements placed upon life insurance companies than on banks. Many of the prominent life insurance companies of the time actually participated in bailing out the banking industry. In terms of liquidity, these ultra-conservative life insurance companies and their wholesale life policyholders were in an enviable position.
Source: https://bankingtruths.com/awr-famous-entrepreneurs-whole-life-insurance-bank/ @ 2021
Source: Company Information https://www.jcpenney.com/m/company-info | JCPenney @2021
Picture credit: Muncie - Circa August 2018: JC Penney Retail Mall Location. JCP is an Apparel and Home Furnishing Retailer IV Editorial Stock Photo - Image of industry, logo: 123857708 (dreamstime.com)