Advantages of Whole Life and the Infinite Banking Concept

Go ahead … fall in love!

There is a saying when it comes to investments, don’t fall in love with them. Just because a particular stock has done right by you in the past, does not necessarily mean it should be a permanent relationship.

However, when it comes to the Infinite Banking Concept … I gotta say, I'm quite smitten. And as for Whole Life Permanent Cash Value Insurance … It’s a forever love story.  Literally a “to death do us part.”

And while not officially an investment, this strategy helps your financial life in so many ways. Here are just some of the Advantages of Whole Life and the Infinite Banking Concept.


Advantages For Today

  • Reduced Taxes – Using the Infinite Banking Concept I am building up often tax-free access to cash values through policy or collateral loans. Others who save in RRSPs or Pension plans have taxable assets that are at the mercy of taxation rates at the time of withdrawals. RSPs do not avoid tax … they only postpone them.   But they also postpone the tax calculation. And I know governments are in trouble and increasing tax rates are a real risk for RSP investors. I have the advantage of having less income coming from taxable sources.


  • Inflation Protection – Along with increasing tax rates, governments are printing money devaluing our dollar and its purchasing power. I borrow against my policy using the Infinite Banking Concept to invest in real assets. In addition, with the guaranteed growth of cash values and death benefit, my policy offers solid inflation protection.


  • Safe Money for Capital Opportunities – GICs and bonds are safe money sure. But currently earning less than 2% and often taxable. And don’t forget this rate is significantly less than the rate of inflation, so you are actually falling behind. Based on average life expectancy, the death benefit typically earns the equivalent to a taxable 6 – 8%.  But I earn much more as I have used the policy to purchase investment properties and invest in stocks at opportune times. It’s a flexible source of capital that I have a contractual right to access through policy loans – no application – no credit check.


  • Truly the “And Asset” - Are there assets out there that will outperform Whole Life? Yes, there are. But with a well-designed Infinite Banking Policy you don’t have to choose. You can do both through accessing the guaranteed cash values.


Advantages In Retirement

  • Paydown Versus Interest Only – In retirement I can live off the capital and the interest of my assets. I know that if I live beyond life expectancy, my capital will be replaced by the growing and guaranteed cash values in my policy. Those without Whole Life will have to live on much less – perhaps the interest only proportions of their investments.


  • Reduced Pressure on Assets – I don’t need to save nearly as much as those who do not have Cash Value Whole Life Insurance – and therefore do not need to take on the same investment risk. This is because I can create a much greater income stream from the same wealth compared to those without a Whole Life Policy.


  • Less Worry About Investment Fluctuation – In retirement when the market has a pull back … I don’t have to worry … as I can rely on my guaranteed cash values in my Infinite Banking Policy. Others will have to adjust their income down significantly or run the risk of running out of money as the same income will encroach on a larger percentage of wealth in a down market. I can wait for things to rebound.


Advantages At Death

  • Although I don’t have to die to benefit from my Whole Life Policy, on death it provides a tax-free benefit to heirs which can be used to offset capital gains taxes and help beneficiaries to keep assets like rental or cottage properties.


Are you ready to fall in love with your financial plan?

Buy Term Insurance & Invest The Difference Or Buy Whole Life?

The answer is it depends.

Let’s start with a simple explanation of each type.

Term (T) life insurance is like renting a house.  Whole Life (WL) is like owning a house.

The initial premium for T is small compared to WL. How much smaller depends on how long you want to be covered.  T is generally available for terms of 5 years up to age 85, sometimes age 100. The most common terms are 10 and 20 years.

WL premiums are based on providing coverage for as long as you live which may be to age 100 or longer.

So, you don’t need to be a rocket scientist to see that a T10 (10-year term) or T20 (20-year term) premium is going to significantly lower initially than WL.

Most T is guaranteed renewable at the end of term to a T1 (1-year term) or the same term as the initial coverage without medical info until usually age 70. Most T is also convertible without medical evidence to WL.

If you want coverage for as long as you live, WL will require lower cumulative premiums over your lifetime than will T.

Now let’s turn to the concept of buy term and invest the difference.

In my 38+ years experience it is rare for anyone to invest the difference.  Many may start out doing so but life happens, and the difference is absorbed elsewhere.

Then there are the non-financial considerations like tax, access and control.

In order to make investing the difference optimal, you will want to invest it tax effectively.  Most will turn to a RRSP (registered retirement savings plan) inside a mutual fund that provides a tax deduction and tax deferred growth.

The problems with a RRSP is if you need access to the money.

Most will allow you the ability to redeem but subject to income tax. Investing in a RRSP also means you forfeit control which means volatility and possible losses.  It also means you must start to redeem your RRSP currently at age 71.  Redemptions mean you lose compound interest and are unable to recontribute unless you have contribution room remaining.   Current contribution room is 20% of your annual earned income less any pension adjustment (PA).

Another investment option is a TFSA (tax free savings account). It is available for individuals age 18 and over.  Carry forward of unused contributions are available.  Past annual contributions have varied with current annual contributions being $6,000 subject to change.  There are no current rules requiring you to redeem at an age. All growth is tax-free. When and if you redeem, all earnings are tax free.  But as with the RRSP redemptions mean you lost the compound interest.  While you can recontribute what you withdraw the following taxation year, the compound interest you missed out on is lost.  Again, commonly, life happens and most never stick with investing the difference.

Many miss that WL provides lifetime compound interest, control (no redemption rules), access to your money via guaranteed loans to deploy for other opportunities with no credit checks.  Many well-known wealthy individuals and businesses acquire WL and use effectively in something called the Infinite Banking Concept, also known as Becoming Your Own Banker.

WL can be viewed as buying term and investing the difference in a tax-exempt growth mutual fund that always receives an annual dividend. This means your investment is guaranteed to increase every year.  A look at mutual fund performance will show that is not the case.

Good life insurance agents will recommend if cash flow is limited that you obtain enough T insurance to provide security for your loved ones if not adequate to obtain WL.

If cash flow is available, WL is one of the most unique, versatile, under-discussed, products in the financial marketplace you will find.

One of our clients after 20-years has accumulated $1.7M in cash value in his WL policies and was very pleased to learn it performed as well as his mutual funds.