Whole life Insurance and the Infinite Banking Concept
Investor · Philadelphia, PA · Member since 2013 · 17 posts · 1 vote
I have been looking into Whole life insurance and Infinite banking and it seems very appealing. From what i hear it can be very beneficial "If" the policy is set up correctly. Has anyone out there got any whole life policies that they have set up for the purpose of being their own bank and/or using it to fund real estate investments? The infinite banking concept was created decades ago by a man named Nelson Nash, and since then their have been many people that have followed suit. Let me know what your experience has been for those of you who have participated in it or maybe know someone who has.
@Jabari Marshall
I have been funding several whole cash policies for over 4 years, following the Infinite Banking Concept. I've not yet used them to fund any real estate deals (I'm completely new to REI) but will be using them do to so in the next 6-8 months. If you choose to go that route, you really need to educate yourself on the IBC concept AND find the right insurance agent and company. You also need to have thick skin when you discuss it with others. :) It bucks the whole idea of government-qualified retirement plans (IRA, 401k, etc). Probably similar to when friends and family try to dissuade you from investing in real estate because they've heard of nightmare landlord stories.
IBC is a long term commitment. You will need to initially “fund it” for 4-7 years. You will need to repay policy loans.
I have read Nelson Nash’s book many times (it’s well worn from reading, highlighting, and taking notes). I learn more every time I read it.
If you’d like more of my insight into it, feel free to PM me. Good luck!
@Jabari Marshall
I have been funding several whole cash policies for over 4 years, following the Infinite Banking Concept. I've not yet used them to fund any real estate deals (I'm completely new to REI) but will be using them do to so in the next 6-8 months. If you choose to go that route, you really need to educate yourself on the IBC concept AND find the right insurance agent and company. You also need to have thick skin when you discuss it with others. :) It bucks the whole idea of government-qualified retirement plans (IRA, 401k, etc). Probably similar to when friends and family try to dissuade you from investing in real estate because they've heard of nightmare landlord stories.
IBC is a long term commitment. You will need to initially “fund it” for 4-7 years. You will need to repay policy loans.
I have read Nelson Nash’s book many times (it’s well worn from reading, highlighting, and taking notes). I learn more every time I read it.
If you’d like more of my insight into it, feel free to PM me. Good luck!
@Jabari Marshall
I’m interested to hear what others have to say. I looked into it pretty extensively and decided it wasn’t something I needed to do. To me it felt like I was buying this policy and locking in a payment I would have to make monthly. Then I could borrow my own money back at 5% interest. Having to make the payments and paying myself interest just didn’t seem that great. I would rather just buy RE with my money.
@Lee Ripma
I agree I thought the same thing you did it seems like just another over complicated thing I have to deal with...
@Jabari Marshall I've researched the topic, but never pursued it. It sounds great, "be your own bank," but I'm not sure how useful the strategy is. You either have to take out a large policy for the cash-value to be useful ($50k+) or wait 4-7 years like @Kendrick Thomas mentioned. Why not just use the cash to buy real estate today? Then, buy a cheaper term-life policy if you're interested in life insurance.
I'm curious to learn how others have applied this strategy.
@Jabari Marshall
I’m interested to hear what others have to say. I looked into it pretty extensively and decided it wasn’t something I needed to do. To me it felt like I was buying this policy and locking in a payment I would have to make monthly. Then I could borrow my own money back at 5% interest. Having to make the payments and paying myself interest just didn’t seem that great. I would rather just buy RE with my money.
Because as you borrow the money it is likely to pay you more than the 5%. You make money on the money you pull out of the policy twice.
@Jabari Marshall I've researched the topic, but never pursued it. It sounds great, "be your own bank," but I'm not sure how useful the strategy is. You either have to take out a large policy for the cash-value to be useful ($50k+) or wait 4-7 years like @Kendrick Thomas mentioned. Why not just use the cash to buy real estate today? Then, buy a cheaper term-life policy if you're interested in life insurance.
I'm curious to learn how others have applied this strategy.
You could say the same thing about real estate. It takes some time to get a return - you have to invest money up front you have to borrow money to make it work.
It’s a long term play. Whole life or IUL is a long term play. I have a ton of clients that contact me in their 50-60’s the term policies are expiring and they’re dumping thousands of dollars a year back into new term policies because things didn’t work out the way they thought (and that’s if they can get coverage). Many wish they had a policy like this.
You do need a specific type of policy to make this work, but over time you will have access to your principal and the policy will self-fulfill and grow. Over time the policy will be worth more than you invested.
If you die before it has time to grow - you still get the death benefit. That’s worth something.
People often say term is cheap. It’s not. It’s like saying buying lottery tickets is smarter than buying stocks because they’re cheaper. Both term insurance and lottery tickets are designed to not pay out. That’s why they’re less expensive. Don’t get me wrong, I sell a lot of term - it has it’s place and most people should have it. WL offers things term doesn’t. At minimum everyone should have a dividend paying WL on their children.
@Lee Ripma
I agree I thought the same thing you did it seems like just another over complicated thing I have to deal with...
It is. It’s not for the average person. It’s a high level strategy.
I have been looking into Whole life insurance and Infinite banking and it seems very appealing. From what i hear it can be very beneficial "If" the policy is set up correctly. Has anyone out there got any whole life policies that they have set up for the purpose of being their own bank and/or using it to fund real estate investments? The infinite banking concept was created decades ago by a man named Nelson Nash, and since then their have been many people that have followed suit. Let me know what your experience has been for those of you who have participated in it or maybe know someone who has.
It is a highly personal thing that doesn’t make sense for everyone. The best thing you can do is get an illustration for yourself and see what a policy could look like. Your agent can illustrate removing money from the policy.
@Jabari Marshall check out the folks at wealth without Wallstreet in Birmingham AL. Russ Morgan & Joey Murie understand how to set up policies to fit you. Give them a call.
Thanks Randy, i really appreciate it.
Understand that when you are leveraging cash value to invest in real estate, you are putting your money to work in two places at one time. And because your money is working in two places at one time, you are earning a higher combined rate of return. This is why it is important to put AS MUCH of your money to work in two places at one time as possible. The loss due to fees must be made up by that higher growth. You will earn more utilizing this approach, but do you want the payback period to be 5 years or 15 years?
When you are utilizing life insurance for real estate investing, you need a Maximum over-funded life insurance policy. Infinite Banking and Be Your Own Bank are just marketing systems to sell life insurance. Most of the IBC and BYOB practitioners do not design their policies for maximum cash value. They instead leave room for more cash to be put in later in the form of paid up additions. You shouldn't leave any room at all for additional premium to be put into the policy later.
If the ratio of cash value to premium in you illustration is not about 85-90%, then the death benefit (and commissions) are higher than they could be.
This subject has been beat to death many times over in threads here on BP. Here is a link to one of the most recent: https://www.biggerpockets.com/forums/519/topics/860357-whole-life-insurance-as-a-foundation-for-real-estate-investing
@Jabari Marshall
I’m interested to hear what others have to say. I looked into it pretty extensively and decided it wasn’t something I needed to do. To me it felt like I was buying this policy and locking in a payment I would have to make monthly. Then I could borrow my own money back at 5% interest. Having to make the payments and paying myself interest just didn’t seem that great. I would rather just buy RE with my money.
I think it would help you to reframe the issue. You are not borrowing your own money back at 5%. Your cash value never leaves the policy. It continues to earn dividends (or interest crediting, in the case of Universal Life). The insurance company is giving you a loan of their money with your money serving as collateral.
So if you can take this cheap money and go out and invest it at 10%, for example, you earn the spread PLUS the growth on the cash value. The combined growth will be greater than you would have achieved had you just invested the same amount of cash directly in that 10% investment. Its just a matter of how long it will take to make up for the loss due to the fees and charges in the life insurance policy. And that is why it is important to work with someone who understands how to design Maximum Over-funded Life Insurance Policies.
@Thomas Rutkowski
I’m still not sold. It just feels too much like a liability. I have to pay monthly for 30 years and if I stop paying the policy lapses. If I’m investing at 10% and I don’t want to invest for a year or two I don’t lose all my hard work. I don’t want to pay for something monthly so that when I die my kids got a massive check and I got a 5% higher return on my money. Maybe someday I’ll get why it’s so great-don’t know. Seems like the only folks who think it’s great sell the policies...
Agree, I am following something too
@Jabari Marshall agreed, doing the same thing,
@Thomas Rutkowski
I’m still not sold. It just feels too much like a liability. I have to pay monthly for 30 years and if I stop paying the policy lapses. If I’m investing at 10% and I don’t want to invest for a year or two I don’t lose all my hard work. I don’t want to pay for something monthly so that when I die my kids got a massive check and I got a 5% higher return on my money. Maybe someday I’ll get why it’s so great-don’t know. Seems like the only folks who think it’s great sell the policies...
Lee,
You're operating on some misconceptions about life insurance. As you look more closely at how these policies are structured, you'll find that a properly designed policy exactly fits with the goals you state. You'll see that Premiums don't have to be paid monthly. You'll see that you're not committed to premiums for life. In fact, if you take a few years off, your cash value will be earning more than any bank account you can put your money into and most any other liquid asset.
Its not about the life insurance, its about making more between your life insurance and real estate by leveraging the life insurance. You're quite literally putting your money to work in two places at one time.
When you put 20% down on a property, leverage is what allows you to earn a greater return on your money. The same is true with this approach. I see you focusing on the 5% return on the life insurance alone when you should focus on the fact that you could earn that 5% plus the spread between what you can make on your investments and your cost of money.
Most of the policies that I design are paid annually and premiums run for only a limited time, with 5 years being a minimum. The policies will not lapse because once YOU want to stop paying premiums, then we drive the cost out of the policy by lowering the death benefit. At this point the policies will run off of their own dividend or interest crediting. And that load is only about 0.25% of the cash value annually.
I have been looking into Whole life insurance and Infinite banking and it seems very appealing. From what i hear it can be very beneficial "If" the policy is set up correctly. Has anyone out there got any whole life policies that they have set up for the purpose of being their own bank and/or using it to fund real estate investments? The infinite banking concept was created decades ago by a man named Nelson Nash, and since then their have been many people that have followed suit. Let me know what your experience has been for those of you who have participated in it or maybe know someone who has
Jabari - I skimmed through the comments on this so it may be redundant to some. I've been using IBC for almost 4 years now and just started my 4th policy. I believe its the most powerful FOUNDATION for wealth generation available today. I work with the guys at Wealth Without Wallstreet in Birmingham, AL. They were mentored directly by Nelson Nash himself and act more as coaches than as insurance agents. They have a really cool app and community that I would highly recommend. In there you can find videos and "courses" to help educate yourself on IBC, or to fine tune your process of using IBC to generate wealth.
Someone mentioned using their cash to buy rental properties versus IBC, well the guys actually have a case study video on using IBC vs Cash on a $100k house. The outcome is an extra $240K+ at the end of 30 years by using IBC to buy the house versus cash. IBC is a very individualized process and the guys at WWW will help walk you through your current situation and how IBC could work for you. Give them a call.
Here is a link to the community where you can learn more about IBC and see how the guys at Wealth Without Wallstreet are helping coach, not just sell insurance.
@Thomas Rutkowski
I’m still not sold. It just feels too much like a liability. I have to pay monthly for 30 years and if I stop paying the policy lapses. If I’m investing at 10% and I don’t want to invest for a year or two I don’t lose all my hard work. I don’t want to pay for something monthly so that when I die my kids got a massive check and I got a 5% higher return on my money. Maybe someday I’ll get why it’s so great-don’t know. Seems like the only folks who think it’s great sell the policies...