OPTIMAL WEALTH STRATEGY GROUP
How To Choose The Right Infinite Banking Policy/Company
There are multiple aspects to consider when choosing the right company/policy.
First of all, it must be whole life insurance to ensure that the policy has both an insurance and cash accumulation component. It is against this cash accumulation component (cash value) that can lend money in future.
Secondly, it should be participating whole life insurance, meaning that you want it to pay regular dividends that will help your cash value to grow faster and/or you can use the dividends to pay a part of your insurance premium.
Thirdly, it is advisable to use a life insurance policy from a mutual company. That means that policy holders become company owners. For example, Guardian, Mass Mutual, etc have paid dividend consistently for over 100 years.
Fourth, you want to determine the right size of a whole life insurance policy (coverage amount, etc.) based on your needs and on resulting life insurance premiums. That involves an understanding of the maximum amount that you are able to contribute to a life insurance policy on a regular basis.
We recommend working with an experienced life insurance broker who understands the concept of infinite banking and has extensive experience with customized infinite banking policies and whole life products.
The Wealth Accumulation Policy
A Wealth Accumulation Policy takes infinite banking concepts, with whole life insurance, a few steps further than a typical whole life insurance policy.
First, Wealth Accumulation Policy utilize participating whole life policies from mutually funded insurance companies. Mutual insurance companies work in the best interest of the policyholders. When the company is profitable, it extends these profits to policyholders in the form of dividends. So when you use a participating whole life insurance policy from a mutually funded insurance company you not only earn a guaranteed rate of return, you also have the potential to earn dividends—further growing wealth and supporting a robust infinite banking system. The mutual insurance companies we work with at OWSG have historically paid out dividends for over 100 years.
Second, Wealth Accumulation Policy are designed with paid-up additions (PUA) riders that create instant liquidity. A paid-up additions rider allows the policyholder to “overfund” their policy in its early years to maximize growth and supercharge the policy’s earnings over the life of the account. Infinite banking is becoming increasingly popular among American families as people look for ways to diversify wealth away from the stock market and reduce exposure to market volatility. Cash value whole life insurance is a proven strategy for growing and protecting wealth, and one that has been used by banks and corporations for decades.
Yes. The strategy behind Infinite Banking—using dividend-paying whole life insurance as your own personal bank for growing and protecting wealth—is proven to work, and has been used by families for hundreds of years. As with any financial tool, the benefits are largely dependent upon how the tool is used and requires clearly outlined goals to measure success.
For the fastest growth and optimal benefits, it’s recommended to pair dividend-paying whole life insurance with supplemental insurance called a Paid-Up Additions rider (PUAR).
A PUAR allows you to “overfund” your insurance policy right up to line of it becoming a Modified Endowment Contract (MEC). When you use a PUAR, you rapidly increase your cash value (and your death benefit), thereby increasing the power of your “bank”. Further, the more cash value you have, the greater your interest and dividend payments from your insurance company will be. You can then reinvest those dividends to purchase more Paid-Up Additions.
By adding a PUAR to your whole life insurance policy, you front load it to maximize its potential over the course of your lifetime.
Permanent life insurance, whole life included, features a unique asset that term life insurance doesn’t offer. When you buy permanent life insurance, a portion of your annual premium is reflected in a built-in savings account called cash value. You can withdraw your cash value during your lifetime, or you can borrow it from your insurance company tax-free.
In addition to your premium payment, your cash value also earns a rate of return. Depending on the type of permanent insurance you buy, this rate of return may be calculated based on sub-accounts or market indexes (like with universal life insurance), or it can be a guaranteed rate set by your insurance company (like with whole life insurance). The reason whole life insurance is preferred for an infinite banking system is that a guaranteed rate of return helps protect your cash flow from market volatility and promises steady growth.
How To Strategically Fund Your Privatized Banking System
Although participating whole life insurance is the preferred vehicle of a successful infinite banking system, it’s important to understand your primary goal isn’t the policy’s death benefit. Yes, you’re buying insurance, but the idea is to purchase the smallest death benefit possible while contributing the maximum-allowed amount by the IRS and retain tax advantages. You’re using insurance as your bank first and as an insurance policy second.
Whole life insurance is substantially more expensive than term life insurance of the same face value, but with whole life insurance, only a portion of your premium is going toward paying for the death benefit. The rest is in your “bank” as cash value, earning interest and dividends. Plus, where term insurance is a “use it or lose it” financial tool, participating whole life insurance provides lifetime guarantees.
A Wealth Accumulation Policy functions as your financial foundation. Instead of cash sitting in a bank, it will be in an account that earns a greater rate of return. Unlike a qualified retirement plan, it retains liquidity and you won’t be penalized for accessing your cash value, regardless of your age or how much wealth you’ve accumulated. If you need to borrow against your insurance policy to take advantage of a purchase or investment opportunity, it comes with a guaranteed loan provision, of which you determine the pay-back schedule. And when you pass away, there is a death benefit payout.
A Wealth Accumulation Policy by itself won’t make you wealthy. But when you factor in the benefits, including tax benefits, low costs, liquidity, rate of return, protection from market volatility, protection from creditors and no limit to yearly contribution amounts (like with a 401k), it’s easy to see why executives, banks, corporations, and wealthy individuals rely on the infinite banking system to help grow and protect their wealth.
