How does it work?
The Infinite Banking Concept teaches one to use a life insurance policy as a financing vehicle. This can be easily linked to real estate. If you have a piece of property earning 5% appreciation every single year, and you take out a mortgage or line of credit against it, that will NOT impact the appraisal value at all. It will keep increasing by 5%. Same deal with a life insurance policy! If you have all your money in the policy, or if you borrow it out, the same amount of interest will be earned.
Are There Any Minimums or Maximums?
You can set your minimum and/or maximum contribution to your policy at just about whatever figure you’d like. When you set up a policy, your money will be going into insurance and into cash. The insurance cost is fairly flexible. If you are above the age of 60, the minimum premium amount might not be able to drop below around $1,000 per year, but for the most part, the insurance cost is easy to customize. For your maximum limit, there are some rules to be aware of…
Is Using High Cash Value Life Insurance Policies with the Infinite Banking Concept Better Than What I'm Doing Now?
This does depend on whatever you are currently doing! Everyone has a unique financial situation, and when we educate people on this concept and how to implement it, we always have the clients’ best interests in mind. Simply put, this will not be the absolute best financial vehicle for everyone to use. There is no one thing that will work perfectly for all people. However, we do believe that using the Infinite Banking Concept with cash value life insurance policies is safe, convenient, and very beneficial as a whole.
What is the difference between direct and non-direct recognition?
A Non-Direct Recognition company (like Mass Mutual and New York Life) does not “recognize” when a loan is taken out of a policy. They will credit the same dividends to unborrowed and borrowed funds. A Direct Recognition company (like Guardian and Northwestern Mutual) does recognize when a loan is taken out of a policy and actually credits a higher dividend rate on any borrowed funds. This way, the policyholder does not feel like they are being “punished” or penalized for taking out a loan.
When Can I Borrow, and How Much?
When: You can withdraw funds for a loan any time you’d like, even within the first week of starting your policy! How Much: Technically, all the cash in your policy is available to you. However, about 95% of the funds you have in cash at any given time is a more reasonable amount. Leaving about 5% in your policy can be useful if you do not wish to pay the loan back and/or circumstances arise where you are unable to pay the interest or your premium – that little bit left in the policy can cover those costs and prevent a lapse in your policy.
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