The Infinite Banking Concept is a process, not a product. The infinite banking concept was established by Nelson Nash in effort to help people take back control of their own money, giving the ability to keep and grow what you worked hard for instead of giving it away to the banks, government, fees and loss. Using a properly structured dividend paying whole life policy, you can recapture the interest you would have paid to someone or something else and still buy the things you want and need.
The main reasons for using a properly structured dividend paying whole life policy is because because the cash value inside the policy is vested (meaning it never goes down) and grows tax efficiently. Insurance premiums are fixed while paid up additions and loan options are flexible making whole life the ideal vessel to practice the Infinite Banking Concept.
Buy term and invest; the rest is a catchy slogan. It should be clear, in the financial world, there is never a one size fits all. The design of the properly structured dividend paying whole life policy is very important and there are generally two ways to structure a policy–One, for maximum commission and low opportunity or two, minimum commission and maximum opportunity. We have been trained to help maximize opportunity.
One huge advantage of life insurance loans is that you determine your payback schedule and payment amount. With most insurance companies, you can pay a policy loan back with a monthly EFT bank draft, or call in and give them a payment over the phone. And the best part is you determine either how much you want to pay per month, or calculate the payment amount based on the interest rate and the number of years to pay back the loan. The most important part to grasp is that all the loan repayment options are flexible and are determined by you. Also, later in life many people use their policy loan provision to supplement their retirement income. As a result, they do not pay back their loan. Rather, the annual cash value growth and dividend payment of their whole life insurance is used as collateral for a tax efficient retirement income.
The main advantage of the infinite banking process is, as Nelson says, that it creates a peaceful, stress free financial life. Other benefits include: The investment portion grows tax efficiently, It is vested (meaning never goes down or will lose $$) – it is not affected by the stock market or economy. You have the ability to borrow against it. This is like a high interest savings account with tax and death benefits. Creditor Protected. Helps you control your money like a banker.
Infinite Banking has disadvantages too. To get started, a person must either be insurable OR have a beneficial interest in someone else who is. Other disadvantages include: It is slow growing. The dividend is not guaranteed. In addition, if you’re not working with an Authorized Infinite Banking Practitioner, you may not be getting the best advice or coaching. To implement this properly, you need a good Coach that has your best interest in mind. It will not reduce your personal or INC tax. The minimum cost of insurance must be paid each year – either by you, your INC, or by the cash value inside the policy. There is a maximum limit to how much you can invest each year.
The simple answer is opportunity cost. When you pay for something with cash, your money leaves you, never to return when it could have been earning interest. Using a properly structured dividend paying whole policy to secure a loan allows you to recapture the interest you would have lost if you simply used cash.