Infinite Banking strategy can be one of the most powerful strategies for cash flow — but it can also be a nightmare if not done properly.
Today, instead of focusing on what you should do, we’ll discuss things you should avoid when structuring your own Infinite Banking process. Because once you know what NOT to do, you can have plenty of room to be creative with what you can do.
Here are 4 ways that infinite banking can be a nightmare:
1. It’s Not Structured with the Right Agent.
There are plenty of agents in the US and Canada, but search for an agent who is familiar (and experienced) with Infinite Banking. This is a community filled with great advisors, and doing your research can connect you with people who understand your vision.
Agents who are experienced with IBC know how to properly structure your financial vehicles, and design it how it’s described in Becoming Your Own Banker, by Nelson Nash. Otherwise, it’s easy to go down the wrong path, or be saddled with a policy that isn’t properly designed for cash flow.
Unfortunately, there are a lot of advisors in the financial space who will claim to be able to do something because they’re looking to people-please. Or they have dollar signs for eyes. Doing research for advisors or agents can help, but don’t discount the advisor who says, “I don’t know, let me look into it.” That type of honesty is rare in the industry, and I have respect for those who don’t claim to know it all, but are willing to learn.
Finding the right agent is priceless.
2. It’s Not the Right Company
The Infinite Banking Concept, and the policies in the book, is structured with mutual insurance companies. These are companies that are not listed on the stock exchange — they are not stock companies. Nor are they property and casualty companies.
There are, however, a handful of phenomenal mutual insurance companies. These are the only companies with whom you can create a properly structured policy. And if the company has been around for 150–200 years, and have paid dividends for more than 100 years, it qualifies as a phenomenal company. On occasion I’ve witnessed arguments about which company is best, but in truth, they’re all phenomenal — any differences are often miniscule.
So do your due diligence, research the mutual insurance companies out there, and choose one.
3. You’ve Got the Wrong Vehicle
This is a big one — if you’re not using the right vehicle, you’ll find infinite banking to be a nightmare.
You’re looking for an overfunded, dividend paying, whole life insurance policy with a mutual insurance company.
It is not a universal life policy. It is NOT a universal life policy.
I cannot stress that point enough. The reason, is that advisors who don’t know any better (see: #1) will push universal life insurance as a “cheaper” whole life insurance. This is simply not true. And if you have the wrong policy, you’ll quickly discover why infinite banking will become nearly impossible.
So how can you tell? Well, after you’ve made your first premium payment, it shouldn’t be much longer until you see cash value in your policy. And not only will that cash value be there, but you’ll be able to access it in the form of a policy loan. Otherwise, it’s not set up correctly.
4. Mismanagement of the Policy
This is an important piece to consider — after all is said and done, are you properly managing your policy? Because each and every piece of the equation could be perfect, but if you’re stripping you’re not making premium payments or loan payments, you’re stripping your policy bare.
Infinite Banking requires you to be an honest banker, as Nelson Nash says — if you’re not, the whole strategy falls apart. It’s all on you to manage things properly, if you want the policy to function as you intend it to.
The biggest responsibility is on the policy owner.
Debunking the Myths
We’ve all heard the criticisms of whole life insurance, and that it’s a “terrible investment.” But insurance is not an investment, and it should not be sold as such. It’s insurance on your life. And, if there’s one thing on which I agree with Dave Ramsey and Suze Orman, it’s that point. It’s not an investment, it’s a savings vehicle, one that comes with certainty.
Another criticism is that, if structured incorrectly, the maximum benefit goes to the insurance agent. On that point, I’ll also agree. But when it comes to infinite banking, commissions to the agent are actually reduced. It’s not the same
You’ll also hear things along the lines of, “You’ll never see that cash value.” And that’s simply not true. Again, if structured correctly, your death benefit appreciates along with your cash value, and what other vehicle under the sun pays you’re a multiple of the face value when you pass away? When the owner of a 401(k) passes away, how much money does their beneficiary get? Well, they get what’s left after taxes. Compare that to whole life insurance, where the death benefit is paid out tax-free.
There are numerous differences between whole life insurance and your retail, cookie-cutter policies sold to the general public. This provides you with a way to invest in real estate like the one percent, and to integrate it into your overall wealth strategy like the one percent. For a deep dive, you can check out my video series: Your Own Banking System.
Live your Freedom, Live Your Legacy, On Your Own Terms,
M.C. Laubscher is a husband, dad, podcaster & Cashflow Specialist. He helps business owners and investors create, recover, warehouse & multiply cashflow. You can learn more about exclusive cash flow strategies in M.C.’s new video series at https://www.yourownbankingsystem.com/
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