Michigan Adds Extraordinary Value to Coach Harbaugh’s Contract Using Insurance
Jim Harbaugh, former coach of the San Francisco 49ers, is entering his second season as head football coach at Michigan. Michigan and Harbaugh, at the direction of his advisors, recently came to terms on a significant contract amendment that results in huge benefits to both Harbaugh, and the University. The amendment comes two years into his seven year contract and makes no change to the$5 million salary he is set to receive each year. Through the amended contract, however, the University will loan him $4 million this year, followed by $2 million each year he remains coach at Michigan through the end of his contract. The loan is expressly for the purpose of acquiring life insurance.
“I’m really proud of the instrument we’re using. We’re using life insurance as a vehicle to deliver value.”
According to Sports Illustrated, if Harbaugh leaves Michigan for any reason, they will stop the payments on the loan, but he does not need to repay the loan until he dies, as long as the insurance policy remains active. The maturity date for the loan is Harbaugh’s death, at which time Michigan will be repaid the entire loan balance.
This strategy is one great example of the power of life insurance when used in executive compensation packages. Harbaugh stands to receive extraordinary benefits through a highly efficient and smart structure.
Jim Hackett, one of the architects of Harbaugh’s contract said “I’m really proud of the instrument we’re using. We’re using life insurance as a vehicle to deliver value. The great thing is the value.”
“The way the design of this works, he gets value that he gives back when his estate settles years from now. The university is essentially loaning him the money during his lifetime, but it comes back to us. I’m really proud of this idea. It’s generous of him. It’s a great deal,” says Hackett.
As more and more organizations see the value in using life insurance as a component of executive compensation, don’t be surprised to hear more highly-paid executives implementing this type of design as a win-win that adds tremendous value to their pay package and legacy plan.
For more information, please read:
Michigan, Jim Harbaugh agree to contract addendum | Sports Illustrated
Harbaugh gets compensation boost via life insurance policy | The Detroit News