Infinite Banking what is it? Is it viable?

Question

I was approached with this concept recently. From my understanding, it sounds like you take out a life insurance policy and take out loans against it to fund your deals. I haven't heard it discussed on any of the Podcasts so I'm curious as to if anyone in the BP community utilizes this strategy? If so how has it worked out for you?

Thanks in advance for your insight!

Thomas Rutkowski · Answer

Policy Loans are not "a secured line of credit of your own money". Insurance companies are required by statute to make loans to their policy owners SECURED BY the cash value. Insurance companies invest their reserves primarily in the debt markets. They purchase government and corporate bonds, mortgage-backed securities, preferred stocks, etc. Part of their reserve portfolio is also loaning THEIR money to their policy owners. These are safe investments because the collateral is held by them.

Sure, you can borrow against securities and other assets. But at what rate and what LTV? The lenders need security. The LTV on life insurance policy loans is as good as it gets. The investor is usually able to deploy more assets via leverage.

Sterling Pompey · Answer

@Matt RuttenbergThis was a great explanation, thank you for taking the time to respond.

Carlos Ptriawan · Answer

when it's loaned it's basically a secured line of credit of your own money that you pass it to other entities, they make money by re-investing and hedging your money.

You could literally put your money into a portfolio of divident yield stock and re-hedge it and loan the portfolio if needed.

If you are good managing your own portfolio (of stock/index/ETF) you could do way way better than "infinite" banking.

Carlos Ptriawan · Answer

This point is very understood, basically they reinvest public individual money which individual person can do the same as well if we are good on the investment … I know insurance company reinvest into pool of A grade debt , for example ….

Jeffrey Evans · Answer

I use it and I like it.  Has been discussed many times on the forums here.  Many haters, many like it.   I wish I had done it sooner.

Sterling Pompey · Answer

@Carlos Ptriawan Thanks for taking the time to respond. This make a lot of sense, I appreciate your insight!

Matt Ruttenberg · Answer

@Sterling Pompey

It’s a good long term strategy to fund deals.  I think it’s important to think of this not as an alternative to investing, but as a viable way to pull funds for other investments.

The concept is to design a policy where the death benefit is “squashed” as low as possible, to promote cash value growth, and over fund it to certain maximum limits.

Once you have the cash built up, you can loan against your own policy to fund deals as cash… mostly small amounts in the beginning and larger amounts as the funds grow.  Then refi out the investment property like any other private or hard money loan into a long term loan, and pay off the insurance policy loan.  Wash, rinse, repeat.

In the long run, you’ll also have a tax-free retirement supplant to utilize if your diligent in paying off the policy loans.

Brandon Vanderford · Answer

@Kelly Jennings is a good friend. He is well-versed on this topic, and is a big advocate of the infinite banking concept. Tagging him, but not sure how active he is here on BP.

Infinite Banking what is it? Is it viable?

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