by Rick Blaine » Fri Jul 14, 2006 09:38 pm
Does anyone here participate in a Equity Index Universal Life Policy with the idea of building up large Cash Value for borrowing? Usually they are heavily overfunded upfront just below MEC limits or Modified Endowment Contract. It is an interesting idea, you'll usually earn anywhere from 4-6% interest or if you pick a more traditional UL or WL one can anticipate 5% from a good Participating W/L carrier like Guardian Insurance.
Idea is stuff as much money as you can in the first 4-5 years. When you have substantial Cash Value all your borrowing is done outside of the Insurance Contract. Take out say $25,000 out to buy a new car. You pay yourself back with 8% interest, insurance carrier will charge 0-4% depending upon your contract. Yet the interest you pay yourself back with is money earned compared to sending it to a third party bank.
Idea is stuff as much money as you can in the first 4-5 years. When you have substantial Cash Value all your borrowing is done outside of the Insurance Contract. Take out say $25,000 out to buy a new car. You pay yourself back with 8% interest, insurance carrier will charge 0-4% depending upon your contract. Yet the interest you pay yourself back with is money earned compared to sending it to a third party bank.
Posted: Fri Oct 19, 2007 06:05 pm Post Subject: not just chasing rate of return
Finding a company with a good participating whole life contract with a paid up additions rider is key. Remember, these concepts and strategies were used by the wealthy before those riders were around, they just work that much better now.
People get caught up in how this is infinite by starting new policies etc. but they tend to neglect looking beyond funding cars etc.
Imagine for a minute, that you had 50K available in cash value. If that is sitting there until you happen to want to buy a car or just look at some large expenditure, it is not being used to its full potential.
Suppose you noticed that living in your home you had benefited from several things, the big ones being appreciation and tax deductions.
You can leverage that 50K from the insurance company, not removing it from you policy of course, but paying the 2-5% interest cost and investing those funds into a property worth 200K. Finding a property that is breaking even or cashflowing a few hundred dollars, you are now using OPM to make your money.
You can go ahead now and DEDUCT in most cases, that same 2-5% interest cost, while finding that your small cashflow is more than enough to cover your interest costs. 50,000 at 4% is under 200/mo and now it is deductible since it was used for an investment.
So youve picked up extra deductions, appreciation and the tax advantages of (artificial) depreciation of the structure of your property.
You might now be able to keep all your EARNED income (the money you have to wake up and go to work to earn, which is taxed at the highest rates) TAX FREE as well, by creating indirect tax deductions and therefore indirect cashflow.
Now, a couple years down the line, you sell, pay back the loan, and 1031 the profits into two properties. (or you harvest the equity through a refinance having raised rents to cover the cost) and now you have your 50K back in there (plus growth) to go purchase more, or buy that car.
This works with any investment, stocks, mutual funds, etc, people just use real estate for the power of leverage and the "less volatile" market.
This is why many use whole life as the underlying contract. because of the saafety, the guarantees etc. the insurance contract isn't chasing rate of return. You are creating your own rate of return outside the contract, and using the benefits and the increased money supply to fuel them. Making your potential infinite.
Posted: Tue Mar 25, 2008 08:18 am Post Subject: No UL with Infinite Banking!!!
Sorry there - Anyone implementing Infinite Banking with a UL policy is not practicing Infinite Banking. If anyone has attended one of Nelson's seminars or read the book at least once will know that UL policies are not used.
Posted: Fri Mar 28, 2008 05:23 am Post Subject: UL/VUL
Anyone using these policies is getting scammed by an insurance salesman with his/her own best interest at heart... Both of these have a "load" of around 8% which the salesman likes to take home. If anyone is pushing this on you, look for a REAL Infinite Banking practitioner.
Posted: Fri Mar 28, 2008 08:44 am Post Subject: insurance
I've been hunting around for Life Insurance. I'm in the 'low-income' bracket. MAN!!...I din't realize there were so many TYPES of Life Insurance, you can get. Hopefully I can find a good policy, at a price I can afford. some policies seem very high. Some that aren't so high, seem like they don't give much 'coverage' from them.
Posted: Sun Mar 30, 2008 05:51 am Post Subject:
With a UL, aren't you also paying the premium and fees throughout the length of the contract, at some point eating away at the CV? You may be making a return on your CV but you are also paying premiums.
Also, if you're only making $35k a year, where are you going to find a way to dump that kind of money into investments?
Posted: Thu May 01, 2008 10:18 pm Post Subject: ul
If you are going to do infinite banking just buy WL. If you are going to just let the money sit and take your chances, then God bless you and I hope you have good luck.
Posted: Mon May 26, 2008 07:19 pm Post Subject: Infinite Banking
One key is find a Life Co that continues to pay the dividends with an outstanding loan (not all companies do)
Absolutely right to look beyond cars when cash allows: I would use the money in the real estate purchase mentioned, or perhaps "self-mortgage".
One idea is to create an LLC as an equipment leasing company for a small business owner to self-lease/rent cars, equipment, etc. Enhances tax deductions, by allowing a higher interest rate to be charged and offers asset protection.
I use WL for I. Bank strategy to guarantee it will be around to use. EIUL only has guarantee if enough cash to cover costs which continually rise. Not as workable when you are constatntly borrowing and need to "chase a return" to keep it funded.
I use EIUL for other financial strategies (charitable giving, NQDC, WBTs, "Roth" type savings, etc.)
Posted: Mon Jun 09, 2008 04:06 am Post Subject: Misunderstanding of how to use which
I am a licesened life insurance agent, among other things (LifeGroupLLC.comto see my resume). I preach using EIULs for equity management as Doug Andrew preaches. EIULs are the best investment around BUT are not appropriate for the infinite banking system idea.
The reason Whole Life is to be used with IBS is that it pays dividends based on the face value, not the cash value. EIULS (and any universal life) pays interest based on the cash value. As a result, your death benefit do not continue to grow even though you pull money out. With Whole life, which does have a lower return, your death benefits continue to grow because the dividends, based on the face value, fund more "paid up" insurance. As a result, you can put more in.
That said, I still have to run the numbers and see which one would end up working better - I encountered the IBS idea just few days ago and therefore didn't have a chance yet to do full analysis and run simulations. It could be that the superior return of the EIULs trumps the dividends efffect.
Posted: Sun Jun 22, 2008 12:18 am Post Subject: IBC
In answer to the first question and to follow up on "Guest's" remarks, this is a great concept and what I've always liked is it promotes honesty and true help from financial planners. It can't be done if not done right. The only advice I would give is stick with the whole life. The concept is becoming your own banker and the policy is the tool. Use a safe place for your money that is going to grow almost guaranteed, increase your wealth by becoming your own banker and financing your cars, home, debt, etc. Good Luck!
Posted: Wed Aug 06, 2008 09:04 pm Post Subject: IBC
The best thing to do is this. If you can afford a couple hundred dollars a month put it into a new whole life policy that is MAXIMIZED and OVERFUNDED, just under the MEC guidelines. If you really feel you need the coverage get a little term on the side to arrive at the death benefit you need. The policy, as you use it for banking, etc, and as the paid up additions are put in place, you will be able to increase that death benefit dramatically. Within 15-20 years you should have all the death benefit you'll ever need as long as you use the concept correctly.
I would stick with whole life in order to maintain guaranteed growth and safety. Its about banking more than the policy growth.
Jake
system edited-link removed
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