How to Take Whole Life Insurance Policy Loans - Infinite Banking
The beauty of the Infinite Banking Concept is its simplicity: use a dividend-paying whole life insurance policy to create a pool of money so you can access cash when you need it. All of the money you put in your policy grows on a tax-deferred basis. When you loan the money to yourself, you set the repayment terms, giving you freedom and flexibility. When was the last time your banker let you decide how much to pay them each month?
The basic concept and the benefits are easy to understand – but not everything about this is intuitive. Here are some of the most common questions we get asked about policy loans – and our answers, to help put your mind at ease.
Q. How is a policy loan different from a conventional bank loan?
There are many differences, but the most basic one is that with a policy loan, you’re using the cash value in your insurance policy as collateral so you can borrow money from the insurance company. You effectively owe the policy – but you also own the policy. You also set the terms that the insurance company can approve, instead of a bank setting terms for you – which can result in very advantageous conditions to pay back the loan. You set the repayment schedule.
Q. Can I take a loan from my policy at any time?
Yes, you can. You are contractually guaranteed to receive your money from the life insurance company when you ask for it. In some larger cases, for corporate clients, you can potentially borrow against non-guaranteed dividends - this is called an "Immediate Financing Arrangement" and we can help you with this.
Q. How much of my policy value can I access?
You can use up to to 90% of your available cash surrender value in the policy.
One note of caution: if the cash surrender value in your policy ever approaches $0, the policy may lapse. Our financial and insurance advisors are here to help you ensure that this does not happen, so that you retain your benefits and coverage.
Q. I want to take full advantage of the tax-deferral benefit. How can I ensure that I won’t be taxed on the money I borrow against the policy?
That’s where we come in. We work with you over the long term. We help ensure that you continue to access your money in the most tax efficient way. There are some simple steps for you to follow and we are here to guide you all along the way.
Q. If I die while there is a policy loan outstanding, what happens to the insurance benefit?
The value of the death benefit would be reduced by the policy loan balance, including interest. Any remainder will be paid to your beneficiary, tax-free.
These are just some of the most common questions our clients ask about using policy loans. Need more information? We’re happy to provide further information - you can contact us anytime by phone or email if you have any other questions.
Resources:
It really is that simple. You fill out 1 form and send it to your insurance company to request a policy loan.
Here are the Loan Request Forms from 3 Canadian insurance companies:
Equitable Life of Canada - Policy Loan Request Form (PDF)
Sun Life Financial - Policy Loan Request Form (PDF)
Canada Life - Policy Loan Request Form (PDF)
Take Next Steps:
Schedule a free, no pressure Discovery consultation now to see if the Infinite Banking Concept can be right for you.
We work with 100s of Canadian business owners, professionals and their families to implement this powerful financial strategy in their lives. We are Authorized Practitioners with the official Nelson Nash Institute click to verify here.
Related Insights
Episode 5 of the Infinite Banking Concept Series - Leaving a Legacy
Welcome to the fifth and final blog in our comprehensive series about the Infinite Banking Concept in Canada. Throughout these four previous blogs we’ve talked about...
Episode 3 of the Infinite Banking Concept Series - How Policy Loans work and what is the Adjusted Cost Basis?
Let’s look at a Whole Life Insurance Policy Illustration that's correctly set up for the Infinite Banking Concept. In this illustration with a Canadian life...
Episode 4 of The Infinite Banking Concept Series – Infinite Banking is a Scam
In today's blog, we'll go over the main reasons given for why the Infinite Banking Concept is a scam. We'll be going over why people...
The 6 Essential Principles of the Infinite Banking Concept Explained
Here’s what you aren’t understanding about the Infinite Banking Concept. Building anything of lasting value begins with a solid foundation—the basics. While Infinite Banking may...
The Infinite Banking Strategy for Canadian Business Owners: How It Works and Why It’s Effective
The strategy's popularity has sky-rocketed especially since the federal government has been increasing taxes on everything – especially you and me, the greedy business owners...
Top 5 Ways Infinite Banking Benefits Canadians
Now, this isn’t just some financial theory for us. I've been using this strategy personally and we’ve been setting it up for our clients for...
Episode 2 of the Infinite Banking Concept Series – The Mechanics and Benefits of IBC
This blog will be discussing the mechanics of infinite banking, as well as the benefits as well as going over some of the differences between...
Episode 1 of the Infinite Banking Concept Series – What is it? Who is it for?
This first blog will go over what the Infinite Banking Concept is, who should and shouldn’t use it, and then we’ll give you a sneak...
Infinite Banking in Canada - Is it Right For You? Who Should and Who Shouldn't Do It?
Today’s blog is all about the Infinite Banking Concept, family banking, private family banking, bank on yourself, it goes by many titles depending on who...
The Ten Commandments of Whole Life Insurance in Canada
Today's blog post is a reaction to this great article titled “The Ten Commandments of Whole Life Insurance”. Something that we like about this article...
Leveraging Your Whole Life Insurance Policy as Collateral for Loans in Canada
When it comes to building financial security and achieving your goals, creativity and strategy are essential. Today, we’re exploring a powerful tool that can open...
How to Leverage Your Whole Life Insurance Policy as Collateral for a Loan in Canada
View on Youtube: https://www.youtube.com/watch?v=HLwzqp_VZQc Two Loan Source Options Pros & Cons of Borrowing from Insurance Companies To get started we’ll look at the simplest and...
