Paradigm Life, Infinite Banking, Whole Life Insurance

[Ben Rutkevitz]

Has anyone on this forum had experience with this company? Paradigm Life claims to use Whole Life Insurance Policies as a financial tool and since i trust this community, I am reaching out to get some referrals.

[Aaron Porter]

@Steven Jefferson  I don't know of any CV permanent life insurance companies that will sell direct to consumer.  Right now we are using 5 or  different companies and it entirely depends on what the client wants, needs, and what their long term goals are because everyone's policies are just a little bit different.  

We only place policies with companies that are A+ rated (better track record, easier to work with, have been around for a long time, proven in the industry)  A.M. Best is the 3rd party rating company that gives the "scores" for insurance carriers.

It is best to find a insurance agent who is well versed and has a track record of setting up successful policies.  my mentor says 90% of agents shouldn't go anywhere near a Cash Value strategy because it is easy to screw it up and then the client ends up having issues.  

[Tommy Feraco Jr]

Quote from @Thomas Rutkowski:

Originally posted by @Dondi Gerber:

Originally posted by @Dondi Gerber:

Originally posted by @Derek Lacy:

It's the old infinite banking scheme from the 80's.  Here is the issue, they will over inflate the gains (an insurance agent can input the interest rate to over inflate the policy), they will have you only focus on the non-guaranteed side of the illustration (the side that they over inflated) and will tell you not to worry about the guaranteed side.  The issue is this is insurance, so the guarantee is what you are buying.

What is your time horizon on your money?  If you are fine socking it away for 10 years before you can get a sizable loan from it, then infinite banking may work for you.  If you are thinking take out this policy and in 3 years access the money, well there won't be a a lot of money to access.  

As for the rate they will propose on the non-guaranteed side, ask them for a copy of the ACTUAL returns received by a client in the same product for the last 5-10 years.  Get that from the actual insurer, 9 times out of 10 on the infinite banking scheme you see they over inflated by about 5%.  I had a client bring me a different agencies proposal for the same, they we're proposing that the S&P 500 would increase at a steady 12% rate year over year for 20 years, thus my client would be VERY happy.  Well we will all be VERY happy if the S&P returns 12% for 20 years straight, it would be the most prosperous time in the history of the US.  

Those are the words of caution, with that being said, I do play a bit of infinite banking on my policies that are now 20 years old, but that's the time horizon you need to make it really work. 

 100% true. Sad but true. 

This is absolutely wrong. The SAD thing, is that there are life insurance agents that don't understand how to properly design policies to meet client needs. As I stated earlier, up to 85% of the premium in a properly designed policy (funded right up to the MEC limit) goes straight to the cash value. I, for example, put $50,000 of premium into a policy each year for 5 years. Remember, you are not borrowing from your policy you are borrowing against its cash value. So when I take a loan and use it to invest in tax liens paying 20%, I am making the spread between 20% and my loan rate (4.4%) AND my cash value is still earning interest/dividends.

Did I use a BS projection? NO. That was last year. 

It doesn't matter what the agent projects on the illustration. 12% is complete BS and that agent should be reported to your insurance commission. What matters is what you can do right now.

There are policies out there right now that have 7%+ dividends with loan rates currently at 5%. It doesn't matter if this stays at this level forever. What matters is that if I put money into a policy right now, I will have cash value right now, before one cent of dividends are paid. I can borrow against this cash value at, for example, 5% to invest in real estate notes paying 15%. I'll make 10% on the spread and I may be able to deduct the interest depending on how I structured my business. IF the company pays 7%, then I make a total of 17% on an investment that paid 15%. How do you guys not see that? 

If the company didn't pay a 7% dividend and paid 5% instead, I still make 15% and when I factor in the taxes, I still come out ahead. 

Finance 101. Its no different from investing with a HELOC.

@Thomas Rutkowski Thank you for your insight into this topic. I did have a question. So, why wouldn't I just continue to utilize the BRRRR method or HELOCs to pull out capital on investment as using it on another property? I am definitely new to this strategy, but I feel that using overfunded life insurance is the same notion as the two strategies mentioned.

I am also asking due to the fact that I am working with an agent now and wanted to learn more about this topic from this platform. I currently have two properties with about 50k in equity that I could BRRRR. So, would it make sense to even use this investment vehicle for my situation?

[Mike S.]

Quote from @Tommy Feraco Jr:

@Thomas Rutkowski Thank you for your insight into this topic. I did have a question. So, why wouldn't I just continue to utilize the BRRRR method or HELOCs to pull out capital on investment as using it on another property? I am definitely new to this strategy, but I feel that using overfunded life insurance is the same notion as the two strategies mentioned.

I am also asking due to the fact that I am working with an agent now and wanted to learn more about this topic from this platform. I currently have two properties with about 50k in equity that I could BRRRR. So, would it make sense to even use this investment vehicle for my situation?

Using an overfunded permanent life insurance policy is not in replacement of other investment strategies. It is in addition to them.

So instead of just doing your BRRRR, you are putting all your cash flow back into life insurance premium, you are then borrowing from the life insurance to reinvest in your next BRRRR.

By adding the life insurance in your flow, you are increasing your return on the long term, but it will for the first four to seven years add a little big more drag. You are also protecting your family with a substantial life insurance death benefit if something happens to you. As a side bonus, the life insurance is creditor protected so you also get some asset protection too.

[Thomas Rutkowski]

Quote from @Mike S.:

Quote from @Tommy Feraco Jr:

@Thomas Rutkowski Thank you for your insight into this topic. I did have a question. So, why wouldn't I just continue to utilize the BRRRR method or HELOCs to pull out capital on investment as using it on another property? I am definitely new to this strategy, but I feel that using overfunded life insurance is the same notion as the two strategies mentioned.

I am also asking due to the fact that I am working with an agent now and wanted to learn more about this topic from this platform. I currently have two properties with about 50k in equity that I could BRRRR. So, would it make sense to even use this investment vehicle for my situation?

Using an overfunded permanent life insurance policy is not in replacement of other investment strategies. It is in addition to them.

So instead of just doing your BRRRR, you are putting all your cash flow back into life insurance premium, you are then borrowing from the life insurance to reinvest in your next BRRRR.

By adding the life insurance in your flow, you are increasing your return on the long term, but it will for the first four to seven years add a little big more drag. You are also protecting your family with a substantial life insurance death benefit if something happens to you. As a side bonus, the life insurance is creditor protected so you also get some asset protection too.

 The only thing I'll add to what @Mike S. stated is that you are right, they are very similar. If you understand the concept of leveraging property to further investments, then you understand the concept of leveraging the cash value of a life insurance policy. One thing to keep in mind is just how much you can leverage. Compare the LTV of the HELOC to the LTV of the life insurance policy loan. The policy loan is 90 to 96%. This means that you can put much more of your money to work in two places at one time.

[Tommy Schluter]

@Thomas Rutkowski, If I have a life insurance policy with an employer for the last 2 1/2 years, but can take the policy with me and convert it to Whole Life would this be more efficient than just cancelling entirely and opening my own personal Whole Life Policy?

[Thomas Rutkowski]

Quote from @Tommy Schluter:

@Thomas Rutkowski, If I have a life insurance policy with an employer for the last 2 1/2 years, but can take the policy with me and convert it to Whole Life would this be more efficient than just cancelling entirely and opening my own personal Whole Life Policy?

 If you are healthy, the ability to convert a policy is meaningless. In fact, it is probably less than ideal since you are stuck with the original underwriter. If you get a new policy, you can make sure you are using a company with a product that is well-suited for private banking. I have only a few IULs that I use because they have the lowest fees (highest cash accumulation) in the industry. There are only a few Whole Life carriers that I believe are truly well-suited for this purpose as well.

[Account Closed]

I just purchased all three of your books. I am really looking forward to learning from them

[Melissa Nash]

Wow- the thread that never dies! I bought a policy with Paradigm- Gary Pinkerton is the agent. Great product for overfunding/investing and overall adding to my retirement plan or if I needed to borrow against it for any emergency. Just another tool in the tool belt.