Top 5 Ways Infinite Banking Benefits Canadians
Infinite Banking is always a hotly debated topic with its fair share of naysayers, but we have the top five benefits of the strategy for you right here.
Today, we’re diving into one of our absolute favorite topics at Safe Pacific: The Infinite Banking Concept.
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 over a decade, and we’ve helped hundreds of Canadians all across the country implement this strategy.
In this video, we’ll break down the benefits of Infinite Banking, and more importantly, how it can work specifically for Canadians.
It’s good to start at the beginning – Why? Why should I adopt this strategy for my savings?
Well, the answer depends on your situation and mindset. It’s not for everyone, but if you’re the right fit, this strategy can be fantastic.
What Exactly is Infinite Banking?
For those who are new here, let’s do a quick rundown. And for our regular viewers, a little recap never hurts.
Infinite Banking was once reserved for the super-wealthy who could afford expert advisors to set it up. But thanks to the internet, all the information is so much more available. Now, we can help you leverage this strategy without needing a high-priced advisor.
So, what is it? In short, Infinite Banking uses an over-funded, participating whole life insurance policy as a better place to put your savings.
It maximizes the policy's Cash Surrender Value (CSV), which you can use as collateral for loans. These policies are built to grow, compounding with dividends from the insurance company’s participating account. This keeps your money growing, while giving you liquidity to borrow against the policy for life’s major expenses or investments.
Want to learn more? We’ve got a tons of blogs under our infinite banking tag on the website.
Now, let’s dig into the benefits of the strategy.
The Benefits
1. High Loan to Value Ratio (LTV)
One of the most compelling benefits is the incredible loan to value ratio you can get. Insurance policies make excellent collateral compared to other assets like real estate or stocks. You can borrow up to 80%, 90%, or even 100% of your policy’s cash surrender value at competitive rates – that’s flexibility you don’t really find anywhere else.
2. Stacking Investments for Accelerated Wealth Growth
This is where Infinite Banking really shines. You’re not just growing your money – you’re growing it twice on the same dollar. Here’s how:
When your cash is inside a properly structured whole life policy, you get returns from the annual dividend paid to your policy, AND you can leverage that cash value to invest in other things. With current dividend rates sitting around 5.5% to 6.5%, you’ve got a consistent source of growth that can compound for your entire lifetime.
Now, I’m not allowed to guarantee future dividends but given the 100+ year track record of these policies paying dividends, I’m confident they’ll continue.
So, to recap this point, you’re earning in two ways:
1. The dividends from your policy
and
2. The gains from whatever you choose to invest your loan money in – whether that’s real estate, stocks, or even your own business.
3. Liquidity for Business Owners
If you’re a business owner, you know how important liquidity is. Infinite Banking gives you access to quick funds through policy loans, without sacrificing the growth of your policy’s dividends.
Whether you need cash for inventory, payroll, or business expansion, this strategy ensures you have what you need when you need it.
Liquidity is one of the biggest reasons business owners tell us they don’t want to invest and often keep a huge amount of money in cash. Business owners don’t want to tie up their money and not have access to it if something comes up like an emergency or an opportunity. By using an infinite banking policy you can get the growth and also the liquidity so you have the flexibility and freedom to make moves if you need to.
4. Tax-Deferred Growth and Potential Tax-Free Loans
Life insurance in Canada is tax exempt. When your cash values inside the policy grow, that’s tax deferred until you take it out. But with the way the infinite banking concept works, you never take the money out, so that deferred tax never happens.
Then when you need to use your money you can access it either through policy loans which are mostly tax free, but can become taxable in Canada. This is a major difference between the IBC concept in Canada and the USA. And it’s also a reason why you need to work with someone who knows what they’re doing and does this all the time. You don’t want to try and set up one of these policies with someone who doesn’t do this all the time.
You can also access your funds through loans from third parties like a bank – these are generally tax free – and again, work with us so we can guide you on using either policy loans or collateral loans and keeping everything on the right side of the tax man.
5. Built-In Life Insurance Protection
Let’s not forget the core reason why this strategy exists – it’s life insurance, after all.
Whether you’re protecting your family, securing a mortgage, or protecting your business, Infinite Banking provides peace of mind. You probably need the insurance anyway.
And the best part? Life insurance payouts in Canada are tax-free – either personally or in your corporation. So it’s a way to grow your money while you’re alive without being subject to high taxes, use your money for your business or investment or retirement while you’re alive without paying high taxes and to pass on your money to your kids and family tax free at the end of it all.
So, there you have it – five big reasons why Infinite Banking can be a game-changer for Canadians.
Contact Us
At Safe Pacific Financial, we specialize in helping Canadian business owners, incorporated professionals, and investors structure life insurance for maximum wealth protection, tax savings, and business growth.
If you would like to discuss whole life insurance or investments, we’re happy to chat and see if we can be a good fit to work with you. Fill out our contact form and we will get back to you within 24 hours on business days.
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