FAQ about Infinite Banking
What is Infinite Banking? How does it work? What are the fees? These are all common questions about infinite banking. Today’s blog will go over them.
How does Infinite Banking work?
In simplest terms, you get a Participating Whole Life Insurance policy, which builds a cash value that you can access.
You as the policyholder pay premiums which are invested and earn dividends which are reinvested into the policy to buy more insurance.
Over time, the cash value of the policy grows, and the policyholder can access the cash values through policy loans. You can also access the cash values through withdrawls, but we generally don’t recommend this.
What are the benefits of Infinite Banking?
It gives you access to self-funded capital which you can access at any time without having to go through a traditional lending institution or credit checks.
It gives you access to tax free loans if they are below the adjusted tax base.
These options are accessible from the growing cash value within the policy.
It also allows for estate planning with the death benefit to leave a lot behind directly for whoever you choose as your beneficiaries. The death benefit on life insurance in Canada is tax free and pays out quickly to your beneficiaries.
So you get to grow your money in a tax advantaged way, use your money in a tax advantaged way while you’re alive and pass your money down to your beneficiaries tax free at the end.
What are the risks of Infinite Banking?
This can be a complex strategy and it’s definitely not for everyone. You need to have good money and savings habits and a high cash flow. If you’re struggling or if you’re running out of money before the end of the month, this is probably not a good strategy for you to use right now.
It’s really important that your policy is set up correctly at the beginning to maximize your cash values so they work with the strategy. Most financial advisors don’t know how to do this because it is opposite of how we are taught to set up whole life policies.
Another risk is that you have to maintain premium payments for a long time to keep the insurance coverage in force. We generally want people to commit to 10 years of premium deposits – and this can’t be a stretch for you – this needs to be 10 years of premium deposits that you can make no matter what, recessions, job loss, markets are up or markets are down. You need that consistency of premium deposits.
The absolute worst thing you can do with one of these policies is cancel it – especially in the early years.
In the very early years of your policy, the total cash value probably won’t equal the amount of money you’ve put in – so if you cancel the policy for whatever reason in the early years you are guaranteed to lose money – so don’t do it.
Because we are borrowing the money by leveraging the cash values, changes in interest rates can affect you. You need to keep on top of this and be committed to the strategy for the very long term.
Is Infinite Banking in Canada Legit or a Scam?
Infinite Banking in Canada is a legitimate financial strategy. There are some advisors out there trying to sell these policies to make a buck and they give the rest of us a bad name.
You want to work with someone who’s officially licensed by the Nelson Nash Institute in the US to ensure you are working with someone who knows what they are doing.
Infinite Banking is a concept that was developed by Nelson Nash in the United States, and it has since been adapted and implemented by financial professionals in Canada and other countries.
To look someone up you can go to the website infinitebanking.org and click the “Find a Practitioner Near You”. We’ve been listed on there for years under Robert’s name. Search for Robert Trasolini and you’ll see we’re there. Their system just shows 1 person per company so that’s why he’s there and not me. He’s the smart one you’ll work with if you want to work with us. I’m just the funny looking one who makes youtube videos.
Can I access the cash value of the life insurance policy at any time?
Basically yes you can access the cash value of the policy as soon as there is cash in there.
Different companies in Canada have different rules – some you can take policy loans after the first 30 days and some won’t let you take a policy loan before 12 months.
We generally coach our clients to start taking policy loans after 18 months – the reason being is that you want to properly capitalize the policy’s cash value before taking policy loans or withdrawals.
How do I get started with Infinite Banking?
To get started with Infinite Banking, it is important to work with a financial professional, like us, who can help you determine if Infinite Banking is the right strategy for your individual financial situation and goals.
We are honest and will tell you if this is a good idea or a bad idea for your situation. We tell a lot of people no – a lot of people are not in the right financial position to set up an IBC policy.
Doesn’t mean they won’t be in a better position late just sometimes they aren’t at the moment.
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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