How does Infinite Banking benefit you?
Today, we’ll take a deep dive into one of our favorite topics here at Safe Pacific – the Infinite Banking Concept.
This is a strategy we've embraced since we started the company, personally applying it over the last 10 plus years to hundreds of Canadians.
We'll explore the benefits of this concept, focusing on how it caters to Canadians.
We often hear questions about why people should adopt this approach for their savings.
The answer really depends on your circumstances and your attitude. It's worth noting that while this strategy may not suit everyone at the moment, it holds tremendous value for the right individuals.
What are the Benefits of Infinite Banking for Canadians?
Once a strategy exclusive to the wealthy, as they could afford to pay expert advisors to set up this Infinite Banking strategy.
Today, thanks to the internet's democratization of information, we can extend this knowledge to a broader audience without the need to spend lots of money on big-firm advisors.
Infinite Banking employs an over-funded, participating whole life insurance policy, serving as a vehicle for investing or financing significant life expenses.
These policies are designed to maximize the Cash Surrender Value (CSV) of the policy and act as collateral for loans against the policy.
The choice of this policy type is deliberate, as it grows with dividends from the Life Insurance Company's participating account, ensuring continuous compounding and growth throughout your lifetime.
The benefits include the internal growth of your money within the policy and the liquidity to take out loans against the CSV for various expenses and investments.
Look at our catalogue of blogs to learn more about the intricacies of this strategy.
The Benefits
1-Enhanced Loan to Value Ratio
A standout advantage is the high Loan to Value Ratio (LTV) in this strategy.
The security of the insurance policy makes it an excellent collateral choice. While other assets like real estate or stock portfolios offer collateral, they often fall short in providing comparably high LTV rates. With a participating whole life policy, achieving 80%, 90%, or even 100% LTV at competitive rates becomes feasible, offering flexibility in borrowing from either the insurance company or a bank.
2-Accelerated Wealth Growth
Another benefit involves the potential for wealth growth through what we call "stacking investments." This strategy enables you to earn returns twice on the same dollar, leveraging the annual dividend from your Participating Whole Life Policy and additional returns from wisely invested loaned funds.
Considering the current dividend rates ranging from 5.5% to 6.5%, this consistent source of growth can compound indefinitely, given the policy's history of paying dividends for over a hundred years.
Now I’m not allowed to guarantee they’ll pay a dividend in the future, but these policies are generally built around having a dividend and their consistent track record of paying dividends for more than 100 years makes me feel confident that insurance company par accounts will continue to pay dividends.
Because you can use your Participating Whole Life Policy for a loan without withdrawing any funds from your policy, that growth can compound forever.
Now, when you take that loan against your policy and invest it, hopefully you make good investments and those grow too.
So, you are effectively earning twice on every dollar you put into your policy and leverage out.
First with the Dividend in your policy. And Second with any investments you make with your loan money.
You can invest in anything you want - our clients generally invest in the stock market, real estate, back into your business, in someone else’s business or whatever.
3-Liquidity for Business Owners
Infinite Banking provides the liquidity that a lot of business owners are seeking.
Utilizing corporate earnings in your Holding company, this strategy offers quick access to funds without sacrificing the compounding effect of dividends.
As a business owner, timely access to cash for growth, salaries, inventory, or other needs is crucial. Infinite Banking simplifies this process by enabling swift access through an insurance company policy loan.
4-Tax Deferral on Policy Growth
The dividend growth within your policy is tax deferred, which without taxation it is enhancing the compounding over time. Properly structured loans against the policy may even render most of the funds you use tax-free, a valuable consideration for maximizing returns. It's essential to consult with your accountant to ensure compliance with tax regulations.
If they don’t know, tell them to call us and we’ll point them in the right direction to answer any questions they have.
5-Meeting Life Insurance Needs
Last but not least, Infinite Banking fulfills a fundamental need for life insurance.
Whether you're safeguarding your family, acquiring a new home, or managing a business, this strategy seamlessly integrates insurance coverage with the potential for financial growth.
Life insurance payouts in Canada are tax-free, offering additional peace of mind.
And there you have it – the five key advantages of Infinite Banking tailored 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.
Related Insights
Wealth and Legacy: A Deep Dive with Vince Cardella
In this episode of The Wealth Multiplier Podcast, host Laurent Munier of Safe Pacific Financial sits down with Vince Cardella, Principal of Strategic Wealth Planning...
RRSPs for Canadian Business Owners, should you invest?
You have two main options: keep the funds inside the corporation or withdraw and invest personally. Today we’re going to go through these 2 scenarios...
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...
The 6 Essential Principles of the Infinite Banking Concept Explained
Here’s what you aren’t understanding about Infinite Banking. Building anything of lasting value begins with a solid foundation—the basics. While Infinite Banking may seem like...
The Capital Dividend Account: A Comprehensive Guide for Business Owners
Why does it exist, and how does it work? Let’s break down the essentials of this game-changing tax provision called the CDA We at Safe...
Merry Christmas – Safe Pacific 2024 Highlights
We’ve been advising Canadians about life insurance and their personal finances for over a decade, almost 15 years now. But today’s video is a little...
Christmas Party 2024 Photo Gallery
Thanks to all who came out to celebrate the season at our annual Christmas Party. We hope you all enjoyed the festivities at The Vancouver...
Interview with the Head of Individual Insurance Business at Equitable Life: Martin Reeves
Equitable Life has long been a trusted name in the Canadian insurance landscape. Recently, we had the privilege of sitting down with Martin Reeves, Head...
The Infinite Banking Strategy for Canadian Business Owners: How It Works and Why It’s Effective
Growth has rocketed especially since the federal government has been increasing taxes on everything – especially you and me, the greedy business owners who make...
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...
Are TFSAs good for small business owners?
One of the main tax advantaged accounts you can use in Canada is the TFSA – Tax Free Savings Account. This is one of our...
Family Office vs. Multi-Family Office: Key Differences, Benefits, and Which is Right for You
Now obviously, every family office is going to be different from family to family, however there is an important distinction between a single-family office and...
