The large insurance policy referral strategy

I’m on my neighborhood’s Facebook group. It’s mostly a place to complain about Ottawa’s public transit nightmares opportunity for growth.

But, lately they’ve been talking about packages. And in particular, the UPS & FedEx’s of the world.

Some people are getting their packages stolen right off their porches. My wife is so concerned about this, that we're not able to leave, if she’s expecting a package.

But, others are complaining about UPS & Fed Ex and whoever delivers the packages, that they aren’t taking the care they should with the packages. One even has a Ring Doorbell (one with a camera), where the delivery driver is doing his best Lebron James impression as he slams the package “boom-shockolaka” style to what I can only imagine is a “fragile only” package.

Similar to the opening scene in “Ace Ventura Pet Detective” that I remember as a child.

It’s quite the controversy in my neighborhood. And, probably yours too.

Then I saw this video, I think out of the US. This one guy was getting angry that the UPS delivery drivers were out there “launching 3s” from the bottom of his driveway. So, instead he took another tack.

Instead of reprimanding these drivers, he decided to buy their love.

At the end of his porch, he put a nice sign welcoming the delivery folks. He then put a cooler filled with ice cold bottles of water. Then he added snacks. Crackers. Cookies. The whole lot.

He figured, these drivers were probably hot and bothered by the end of the day. That’s why they were launching his packages.

And guess what. It worked. The drivers started to put the packages nicely on his porch. They grabbed the water and snacks.

I think this is all because of the law of reciprocity.

Most houses are strangers. But, if that stranger gives you a gift, even as small as a bottle of water and cookies, they ain’t no stranger anymore. They are family. And we take care of family, right?

Such a small act made it all human. Not a package to be launched, but a package to be cherished.

It’s pretty amazing. But, you can see this stuff everywhere.

If you treat people with dignity. They’ll treat you better. If you give them a gift. They’ll feel the need to give something back.

At the end of the day, what did this really cost. Almost nothing. But now, these packages were delivered with care. They felt responsible for them.

I bet they’d even tuck the package around back to keep it safe.

Now, I don’t know how many packages they delivered to this house. But let’s say it’s only 1 per week. That’s 52 per year. Enough time to develop a real relationship.

The point being this:

You can develop a relationship with complete strangers by taking the step to realize they are human like you and me. And, by making their life just an ounce better, week and week out.

Now what would happen if instead of making their life just a wee bit better, you made it a whole lot better.

I’m talking about “life changing” amount of betterness.

Would those people love you?

Would they scream from the rafters about how great you are?

I bet they would.

Now, what I’m about to tell you isn’t meant as way to get referrals. But honestly, if you do it the way I tell you, it might be the greatest “accidental referral” tool you’ll ever use.

It’s so good, that people won’t be able to keep you a secret. This isn’t to say they’ll go out of their way to call all their friends and tell them how great you are.

But, when the conversation leads to it, they’ll say:

“You need to talk to my guy/gal.”

And, they’ll keep going back to that well more often than Commissioner Gordon reached for the ‘ol Bat-signal.

So here’s how it goes. Here’s what you can say to any business owner out there:

“I help business owners like you, get money out of your company tax-free.”

So, how exactly do we go about doing this?

There two ways that you can use an insurance policy to get money out tax-free.

1. When they die.

2. When they want cashflow.

While #2 is more interesting. Let’s first understand #1.

If you’ve been reading me long enough or you’ve so much as talked to an insurance person in the last little while. There are some serious advantages to life insurance death benefits.

At the most simplistic. When death benefits pay to the corporation, the amount that is credited to the Capital Dividend Account (CDA) can be taken out of the company tax-free.

To keep it super simple. If the paid death benefit was $1,000,000 and ACB was $500,000, then the CDA is what???

$500,000.

You got it.

While the company still gets the full $1,000,000 in the corp, only $500,000 of it can be taken out as a tax-free dividend.

And, if the client lives for a long-time, the ACB will eventually be ground down to $0. Which is what you want to maximize the CDA.

Now that’s all fine and dandy. But, what if I want my money, I don’t know, some time before I die.

Well, Chuckles, this is where it gets interesting.

There is a way to get cash flow out while the person is living. Many people will take it out during their retirement. But some will do it before, maybe if an opportunity hits or maybe something like the whole pandemic.

The gist of it is, they can take money that would normally be taxed as salary or dividend and take it out tax-free.

Now, just a word of caution here. Some people consider this an aggressive strategy. So, know your client all that stuff. Don’t be talking to them about this if they’re against debt and buy GIC like all the “end of the world” preppers awaiting the second coming of Haley’s Comet.

But, for the folks that wouldn’t mind not paying tax on some of their money. They may like it. They may like it if they feel targeted by the government (I’m looking at you Doctors, Farmers, etc.).

Here’s how it works. You buy a corporate insurance policy. And, then when it comes times to pull the trigger, you set up a personal line of credit – not a corporate one.

Then you draw income on it, “Bob’s your uncle”.

Well, not exactly.

See, the good ‘ol CRA would say that income you’re drawing on the line is what they call a “shareholder’s benefit”. In other words, “pay me my money $%#%$”.

They will tax you for shareholder benefits. Because, in this case, the individual is using a corporate asset (which they have to pay for) to support the loan. Essentially, the cash value of the insurance policy in the corporation is securing the loan.

Now, CRA is absolutely correct in this regard.

But, I wouldn’t be telling you all this if there wasn’t a way around it right?

What you can do it to pay a fee to your company. And, I want to stress here, you are only paying yourself. You personally, are paying money to corp.

We call it a guaranteed fee. But, you are simply paying yourself. Now, the guarantee fee is considered taxable income. But again, its just going from one pocket to the other. Your personal pocket to your corporate pocket.

Not something we normally condone. People want to get money out of the company tax-free, not put it back in. But the reasoning in all of this, is to get money out tax-free.

Then, when you draw on the personal line of credit, it’s no longer taxable.

Essentially, you just did something that nearly every business owner I’ve ever met wants. To be able to get money out of their company tax-free.

Now, it isn’t without risks. But it does what I said it does. It gets money out tax-free. And, who doesn’t like tax-free money.

You know who loves tax-free money?

Your client.

Now I should say, if you are going to go out there and start talking about this. You may want to have an insurance partner to help you through all the details, just sayin’.

And, you absolutely want the accountant on board.

It may not work for some clients.

But this is about providing options.

“I help business owners get money out of their company tax-free.” And, you can amend the statement to say:

“It may not work for you.” Remember what this is:

Negative Striplines.

Being more negative about the process than your client expects you to be.

Or said another way:

“I help business owners get money out of their company tax-free. It doesn’t work for everyone, but do you want to learn how it works?”

It’s like bait for clients. Who would say “no” to that?

Until next week,

Andrew

P.S. I’m going to be in Toronto on September 3rd hosting a special event for email subscribers in the Distillery District from 6:30-8:30. If you make it out, I’d love to meet you.

If you want to join, send me an email and I’ll send you more details.