Why Cash Value Life Insurance
High cash value life insurance is essentially a supercharged savings account.
Instead of using a run of the mill whole life insurance policy , we specialize in putting as much money into cash value as possible. In fact, while a traditional life insurance policy takes up to 10 years to become profitable, we are profitable in a few short years.
It is the only financial tool that provides solid growth , is guaranteed never to lose money, grows tax free, and is completely liquid and yours to use.
It is a great savings tool to save up for emergency expenses, cars, down payments, medical expenses, college, weddings, and anything else you might need cash for. It literally creates infinite banking opportunities.
Then, when opportunities come your way , you can take advantage of real investments that can skyrocket your wealth even further.
Benefits Of Private Family Banking
The main benefits associated with family banking are tax advantages, security, and interest-free cash flow. Whats more, the private family banking concept allows you to borrow money with none of the hurdles that come with credit applications.
Lets take a closer look.
The first tax advantage to whole term policies is that they offer tax-deferred growth. Second, when the death benefit is paid out, this is tax-free.
While youll be charged interest on what you borrow from a whole life policy, this will often cancel out. When you apply for a loan against your cash value, the insurer does not draw on your policy. Instead, they loan you funds from an independent account that they own.
Therefore, while they are charging you interest on your loan, your cash value is untouched and continues to earn interest and dividends at a compounded rate.
Another advantage of borrowing against your cash value is theres no approval process. The money is yours to borrow so long as you have sufficient cash value, and you can be in possession of it in a matter of days.
Lastly, any money you borrow is private, and wont show on your credit report.
While retirement funds account for the lions share of most peoples financial security, these are not always the safest of vehicles for saving. The pandemic spurred market crash is bringing this to the forefront of peoples minds as they watch their 401K account balances dwindling.
Whole Life Policy Design Necessities And Add
Now you shouldnt get any type of life insurance policy as your private family bank.
Nelson Nashs bookThe Infinite Banking Concept Becoming Your Own Bankerand Pamela Yellens Bank on Yourselfbooks insist that it must be a Participating Whole Life Insurance Policy from a mutual insurance company.
Although we are also big fans of using certain Whole Life insurance policies for the infinite banking concept, we also recognize that certain Indexed Universal Life insurance may also work if structured properly. However, since there is additional risk associated with these types of policies, we recommend that you fully understand all the pros and cons of Indexed Universal Life before using IUL to be your own bank.
Getting back to using the time-tested & true Whole Life insurance to become your own banker, we fully agree that its of utmost importance to get your policy from a Mutual Life Insurance Company . This is critical since mutual companies are owned by policyholders and share their profits with Whole Life policyholders in the form of dividends. Its what makes Whole Life insurance cash value a true non-correlated asset with solid steady growth rates, unlike high-yield savings accounts or CDs.
In order to maximize cash value growth and early access to the equity inside your own bank, you also will need to make sure your Whole Life policy includes these 2 key riders:
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Banking Myth #1 Whole Life Insurance Is A Bad Investment So Using It To Become Your Own Banker Is A Bad Idea
Dont get me wrong, depending on how the policy is designed, Whole Life Insurance can certainly be a bad investment vehicle, but that is completely optional.
There is an infinite number of ways to design a policy for different financial goals. Here are the two opposite ends of the spectrum:
- If someone wants the maximum amount of death benefit carried all the way to life expectancy, then cash performance will suffer
- Conversely, if someone wants to use their whole life policy for cash value accumulation and private loans to be your own bank, then its optimal to have your premium payments pay for as little death benefit as possible
So whats the truth about re-engineering life insurance products to become your own banker?
Getting The Right Policy
Once you thoroughly understand the concept of family banking, youll be able to ascertain whether it is something that fits in with your financial goals. If it is, the next step to becoming your own banker is to investigate whole life insurance products.
There are many different types of whole life policies, and not all of them are suitable for private family banking purposes.
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Borrow From Your Policy To Finance Your Purchases
This is the point where you become your own banker. For your personal banking policy to work correctly, you should borrow your cash value rather than withdraw it. When you make withdrawals from a life insurance policy, the cash value is depleted by the amount of the withdrawal. In contrast, when you borrow from your policy , your cash value account continues to grow for you.
When you take a loan against your insurance policy, the insurance company makes the loan and your cash value is the collateral. The best thing is that although a portion of your account has been collateralized, the entire cash value continues to earn interest on a compounded basis. The best news is, now that you are banking with yourself, you can use the money for any reason you choose.
How Does Infinite Banking Work
The Infinite Banking Concept revolves around a whole life insurance policy. Whole life insurance, versus the more common term life insurance, is a permanent life insurance policy. This means the policy is guaranteed for a lifetime as long as the premiums are paid on time. In comparison, a term life insurance policy only lasts for a certain time period, such as 20 years. or up to a certain age, such as 65.
Premiums for a whole life insurance policy are higher than for a term life policy. Here are the three components of where your monthly premium payments go:
- Fees and operational costs
- The portion that covers the death benefit
- The cash value portion held in a savings-type account
Part of each premium payment is funneled into the cash value savings portion. This is a unique feature of a whole life insurance policy because you can borrow against this growing, tax-deferred cash value portion to fund major life expenses such as buying a home or paying for college. Its the cash value of your life insurance policy that will enable you to become your own banker when you follow the principles of infinite banking.
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Look At Cash Value Accumulation
For a whole life policy to truly facilitate family banking, it needs to provide maximum cash value accumulation. Most policies are structured in the opposite direction, in the interest of enhancing the death benefit.
To be able to achieve a faster rate of compounded interest, and a cash value that you can borrow from, like a bankyou need a policy thatll allow you to plow all your resources into the cash value. This is often termed to be a blended policy.
So What Are You Waiting For
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Why You Should Care About Self
One of cryptos greatest strengths is that it does not require any financial institution it is stored and managed entirely by you. Yet, many crypto users
Once you learn how to approach cryptocurrency, there are actually many different ways you can hold it. Each option has its own pros and cons, which well break down for you now.
Take Advantage Of Riders
To meet the criteria for effective cash flow banking, a policy also needs to allow paid-up additions riders and term insurance riders. These riders essentially allow you to increase the cash value of your policy as quickly as you can without triggering the IRS stipulated level where your policy will be deemed an investment for tax purposes .
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Advantages Of Infinite Banking
On average, 34% of Americans monthly income goes toward paying off debt, according to Northwest Mutuals Planning & Progress Study. IBC focuses on how to redirect that money back to yourself through privatized banking.
Here are the advantages of infinite banking:
- You may borrow for anything youd like, with no explanations.
- There are no required to borrow.
- Dividends, loans and withdrawals are tax-free.
- The policys cash value continues to increase over the policys lifetime, even while youre borrowing.
- You can contribute additional money towards your policy value.
- You can lend money from the cash value to family or loved ones.
- Interest rates are generally lower than for a traditional loan.
- Pay yourself back at your own pace.
- Youre creating a financial source by funding your own future loans while building an inheritance for your beneficiaries in the form of a policy death benefit.
Disadvantages Of Infinite Banking
Infinite banking requires a long-term strategy and plenty of discipline. The insurer wont set regularly scheduled payments on your behalf but will expect the loan to be repaid. Its up to you to be financially responsible when youre your own banker. This carries some disadvantages:
- Monthly premiums can be high.
- Unless you make advance arrangements, the life insurance company will absorb the cash value upon your death and the beneficiary will receive the policys death benefit.
- If you dont pay the loan back, the amount will be deducted from the death benefit.
- Qualifying for a new whole life insurance policy may be difficult for older individuals or those with poor health.
- The amount paid towards a permanent life insurance policy and the cash value balance could grow more over time in other investments such as an index fund.
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Understanding Private Family Banking
The first step to becoming your own banker is to get to grips with the concept of family banking, also known as the infinite banking concept.
When people hear the term become your own banker they often picture literally starting a bank. Or, they think it involves hiding money in pillowcases under the floorboards.
Private family banking is neither of these.
Whos Got Custody Of Your Cash
When an investor places money in a bank, they surrender control of it. The same happens in many crypto wallets which are referred to as custodial. The wallets offered by some of the biggest crypto exchanges are custodial, meaning users must jump through hoops to access their funds or pay extra fees to make payments.
The next generation of wallets is non-custodial. When you use a non-custodial wallet, you are the only person who has access to the funds, which are protected by a private key. Custodial wallets store long lists of these keys, which can be hacked and then used to steal money right out of victims digital purses. With non-custodial wallets, there is no centrally maintained private key database to crack into, so users are safer. They are also free to access their money whenever they want, regardless of what has happened to the company which made the wallet. When a large custodial wallet exchange goes down or even changes its policies under government pressure, it may lock users out of their accounts. If it becomes insolvent, investors can even lose control of their coins with little chance of ever getting them back.
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Start A Bank By Following These 10 Steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your bank. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Requirements To Start Your Own Bank
With respect to individuals as either directors, shareholders, partners, owner of account, trustees or beneficiaries:
- Full name, date and place of birth, nationality, permanent address, and occupation
- Notarized copy of photo identification document
- Where that individual does not have the above identification document, Notarised copy of that individuals full birth certificate, where a notary has verified that copy and
- A passport photograph of that individual, with the full name of that individual, the signature ofan identifier, and the date of that signature set out at the back of the photograph and
- A letter signed by the identifier setting out the identifiers full name, date and place of birth,and permanent address
In all cases:
- Two references for each beneficial owner, preferably one from your bank. We may in limited instances waive this requirement if the introducing agent can verify the owners bona fides in writing.
- Where we are opening a bank account, the two references must be addressed to the Bank
- Name and address of your Legal Advisor/Attorney/Solicitor
- Additional requirements, which may be extensive, as needed in each jurisdiction.
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Start A Whole Life Policy To Be Your Own Private Family Bank
Quite simply, the strategy requires that you take out a whole life insurance policy on yourself if you can qualify medically for it. If not, you can purchase a policy on someone close to you to be your own bank with.
Warning: Insurance companies hate STOLI and so does the IRS.
However, here are the types of relationships insurance companies will sometimes issue a whole life policy on for you to own and control as your own bank:
- Key employee
- People you have loaned significant amounts of money to
Note: With proper documentation, other scenarios may be possible to become your own banker using other people as the insured for your infinite banking life insurance.
Once you have identified who to buy insurance on, whats the next step?
Banking Truth #1 Can You Become Your Own Banker Using Life Insurance As Your Own Private Family Bank
Does this whole family banking strategy really work?
The short answer is yes it can.
The mechanics of this so-called infinite banking concept are sound and work quite well, if the underlying whole life insurance policy is designed properly for maximum cash value accumulation.
You can access one of the most detailed and robust libraries of articles and videos explaining exactly how Whole Life insurance works for banking on our site.
There is a unique combination of features, riders, and life insurance policy design techniques that allow for an overfunded whole life policy to optimize these 7 key benefits ideal to be your own bank:
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This unique concoction of benefits cant be found in any other asset class and also make Whole Life for retirement the ideal complement to other riskier investments.
Also, contrary to popular belief, Indexed Universal Life can also function quite well as your own private bank if it is designed and monitored correctly. You can read all about the pros and cons of IUL here.
This leads us to our first myth and most often asked FAQ
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Infinite Banking: What Is It And How Does It Work
Infinite banking is a concept that lets you become your own bank by leveraging the value of a dividend-paying permanent life insurance policy. Developed by economist Nelson Nash in the 1980s, infinite banking gives you the freedom to access your policys cash value by borrowing from yourself and paying yourself back at any time. Imagine never having to worry about a credit check, high-interest payments or having to apply for a car or student loan ever again this could be a reality via infinite banking.
Being your own banker can be a useful tool on your path to financial freedom. Take a closer look at how the Infinite Banking Concept, or IBC, works.
What Is Family Banking
Family banking, or infinite banking, has existed for some time and was popularized by Nelson Nash. He used the concept to rescue himself from unsustainable debt and grow his finances to the point where he owned multiple family banks.
The way he did this was through whole life insurance policies.
Whole life policies used to be the norm in life insurance. As time progressed, term life insurance surpassed it in popularity. Term life insurance is much cheaper than whole life insurance. However, it lacks most of the benefits that whole life policies hold.
Instead of expiring, whole life policies are valid for the duration of your lifetime. After this, they pay out a tax-free death benefit. As well as a guaranteed death benefit, these policies also accrue what is termed a cash value.
The reason why whole life policies can be used as a private bank is that you can borrow against the cash value you have accrued.
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