Frequently Asked Questions – Infinite Bank

1. What is the Infinite Banking Concept?

The Infinite Banking Concept is simply a cash flow management system, built on the platform of a dividend-paying whole life insurance contract. Why is whole life insurance the chosen vehicle for Infinite Banking? The life insurance companies we use have been around for 100+ years and have A-rated financial strength. These companies have never experienced any bankruptcies or needed to be bailed out, unlike many banks over that period. We use mutual insurance companies because the policyholders are the owners, not stockholders. This means whenever the company has surplus profits they are shared with the policyholders via a dividend. High Cash Value Life Insurance gives you high liquidity, the safety of principal, guaranteed growth, and tax advantages with a properly configured policy.

2. Who is Infinite Banking Concept for?

Infinite Banking is for anyone looking to take control of their finances and use their money when and however they see fit. This strategy allows people to buy investments, pay for school, or fund any other need while simultaneously saving and building wealth. Even if you are uninsurable, there are ways to start a policy on your husband/wife, kids, or business partner.

3. What other names does this go by?

There are all sorts of names that advisors have coined for similar concepts, which use permanent life insurance as a way to become your own banker. This is a proven concept and it has been used by the ultra-wealthy for decades. Some of the other names people call this are cashflow banking, fire your bank, bank on yourself, private family banking.

4. Why isn’t everybody doing this?

Most people that do proper research and understand the concept are. Unfortunately, there are very few professions in the industry that know and fully understand this concept and have the ability to utilize it for their clients.

5. What if I can get a higher rate of return elsewhere?

We hope you can get a higher rate of return. Consider this as a cash management system. On a regular basis, we want to get on the habit of putting money away for the purpose of investing. Once the money is put away you can look for investments, which take due diligence. The idea is to find sound investments that have a high expectation of the return of principal and a good rate of return on that investment. Ideally, this is where you place your cash between investments.

6. Why do I have to pay interest to borrow my own money?

Once you understand how the whole thing works you are not actually accessing the money from your policy. You are accessing the money from the general fund of the insurance company. When you do this the insurance company uses the cash value in your policy as an assurance. Your money is actually not borrowed and continues to receive dividends on the full amount. The bottom line you’re not borrowing your money, you’re borrowing the insurance companies and yours remains inside the policy compounding.

7. Can I roll my RRSP into this?

No, RRSP are government-sponsored plans and have their own rules attached to them. You would need to get the funds out according to the government rules and pay the taxes.

8. Does the insurance company steal my cash value when I die?

No. These policies are set up so that cash value is equal to the death benefit at age 100. You are always going to get your death benefit. However, if you have loans outstanding the insurance company will subtract this amount from the total death benefit paid to you because you have already received this amount.

9. How much Cash Value can I borrow? and how quickly?

You can access up to 90% of the cash value. The true answer to this is pretty quickly typically within one month from when the policy is initiated. After the policy has been in force for some time it typically takes 2-3 business days.

10. How do I access my money?

There are 4 ways to access the capital in your IBC designed policy, which are a sad way, a simple way, a smart way, and a sophisticated way. The sad way is you pass away and the death benefit is paid to your beneficiary. The simple way is to withdraw the money from your policy. The smart way is to take policy loans. The sophisticated way is to take collateralized land from a third-party lender. This is done to avoid MTAR rules and take out large amounts of money from the policy tax-free. This is really a misleading concept because when you take a policy loan, the insurance company lends you their money. You pay annual simple interest than on this money, allowing your money to stay in the policy, compounding and earning interest uninterrupted.

11. Can I have more than one policy?

Yes, everyone’s situation is different. You can have as many policies as you like, there are some people that have more than 10. It can be advantageous to have one big policy from the start to increase the compounding. Although some people may like several smaller policies to coincide with specific goals in life.

12. Won’t I get killed by the agents high commissions?

The way that we design policies is completely different from how most agents design their policies. We focus on the cash value of the policy whereas a typical agent would focus on the death benefit, which has a much lower cash value. The commission is based on the annual premium which for an Infinite Banking policy is typically a 50%-70% reduction in commission compared to financial professionals who offer a whole life policy without proper setup and design. The correct design will allow you to accelerate the cash value from day 1 by reducing the commissions of the advisor and redirecting that money back to your account. It pays to work with an advisor who can not only teach you how Infinite Banking works to protect, grow and transfer wealth, but also who is not just concerned about the commission they earn from you.

13. What are the guaranteed parts of infinite banking policies?

When you have your personalized Infinite Banking policy designed for you. You will be able to see the guaranteed amounts of Cash Value, Dividends, and Death Benefits.

14. Why do you recommend mutual companies instead of stock companies?

Mutual companies operate for the benefit of the policyholders, whereas a stock insurance company is focused on shareholders and their benefit. As a whole life insurance policyholder at a mutual company, you are an owner in the company.

15. Are Infinite Banking Concept premiums flexible?

We use a whole life insurance policy designed to practice Infinite Banking. They are very flexible, these policies are structured to have a premium payment and a paid-up addition rider payment. In any year you can opt-out of paying the paid-up addition rider or pay any portion of it. In addition, over time your dividend payments can grow large enough to cover your premium payment.

16. Is my death benefit guaranteed?

Your life insurance death benefit is guaranteed, minus any outstanding loan balance.

17. How do I pay a policy loan back and do I determine how it is paid back?

An advantage of life insurance loans is that you determine your payback schedule and payment amount. You can decide either how much you want to pay per month or calculate the payment based on the interest rate and the number of years to pay back the loan. It is completely flexible and determined by you.

18. When you pay yourself back, are you paying yourself interest?

No. First, you are not borrowing your own money. You are borrowing against the cash value you’ve built up in your Infinite Banking contract. I would also add that “paying yourself back” or “paying yourself extra interest” are simply euphemisms to help explain the benefit of paying your policy loans back quicker. Additional “interest” you charge yourself on loan repayments will simply accelerate the payback of the loan. Once the loan is re-paid, the entire loan payment can now be directed towards the Paid-Up Addition Rider of the contract. This strategy of “charging yourself more interest” is essentially a forced savings strategy meant to harness and reinforce the habit of saving money by capturing your newly created cash-flow before it can be diverted and lost forever to newly created expenses.

19. Do I have to pay for the policy for my whole life?

You can choose to fund the policy for a limited time or for your whole life. Some people simply like to have a fixed period or time that they pay for a policy say 10 or 20 years. However, if you set it up from the start as a life pay you have greater flexibility and can use various options to stop paying in the future and still have all the benefits.

20. Is my policy creditor protected?

If your beneficiary designation is part of the projected class or if your beneficiary is an irrevocable beneficiary your policy is creditor protected.

21. Can the Infinite Banking Concept policy be split between different beneficiaries?

Yes, Also, beneficiaries can be changed in writing by the owner after the policy has been issued.

22. Am I too old to benefit form Infinite Banking?

No, it does take a few years to fully capitalize your Infinite Banking Concept. However there are different ways to set up your account, and even if you’re older, you may be able to capitalize your account much more quickly. The best way to find out is to request a free, no-obligation consultation.

23. Can I buy a policy on my parents?

Yes. The real question is, should you. The first priority should be to maximize your own policy. A reason this may be used is if you yourself are not insurable because of health issues and still won’t take advantage of all the benefits.

24. Should I buy a policy on my kid instead of me?

You should always fully insure yourself and your spouse before looking elsewhere. (kids or parents) Once you have your own policy in place then get a policy on your kids. The policy can be used to fund several milestones in your kid’s life. It is also a great tool to teach kids about money throughout their lives. Please check out our section on Set For Life Kids.

25. I am considering starting an RESP for my kid is there an advantage to an Infinite Banking policy?

Yes! First, giving your child the gift of life insurance locks in their insurability for life. With more children being diagnosed with autism, Children’s Diabetes, and other heartbreaking illnesses, you have the ability to lock in a child’s policy while healthy giving them more financial options later in life. Second, the money saved in an Infinite Banking contract is protected from stock market loss. An Infinite Banking policy provides contractual guarantees and predictable growth every year. RESP accounts will fluctuate based on the performance of mutual funds offering no such guarantees. Third, if your child decides to use the money for something other than higher education, the money in an RESP account will be taxed AND penalized. The cash value in a life insurance policy can be used tax-free no matter what the funds are used for. Never underestimate flexibility. Finally, giving your child the gift of controlling their financial future by the time they are a young adult will be absolutely priceless. Imagine if you could have had the benefit of eliminating banks from your life at an early age? Please check out our section on Set For Life Kids.

26. Is there an age limit to purchase a policy?

Yes. 15 days old as a minimum and 80 years old as a maximum(sometimes to age 85).

27. How much do I need to invest?

This is a savings tool that can be used similar to how you would use a bank. It has contractual guarantees attached to it. Unlike investments that can go up or down, Infinite Banking can not lose money. So it’s really more about saving than investing. A plan can be started for as low as a few hundred dollars per month.

28. How does an Infinite Banking Concept provide me with a tax free retirement?

Since the Canada Revenue Agency views the cash value in your Infinite Banking policy like life insurance, they do not tax it. If you take a loan out against the cash value of your policy, that is not taxable either since loans are not considered taxable income.

29. What are the risks of Infinite Banking?

The main risk is that financial circumstances happen in your life and you are unable to make the minimum required yearly premium to keep the policy active, you then may be required to surrender your policy.

30. Which Companies Underwrite or Help Create the Policies?

The financial institutions we work with have been around for over 100 years. There is no market volatility tied to this product, meaning that the values don’t fluctuate like with other investment types. This is reputable in the financial world because it reduces risk and improves returns.

31. How does the process work?

We use a participating whole life insurance policy as a place to create a family bank by investing in a pool of capital. This compounds interest in the clients favor. Instead of taking dividends out in cash, the client reinvests them in the policy, to compound the interest more quickly and produce higher cash values in the policy.

32. How does my Child Qualify?

The participating child in the policy must be 15 days old and healthy. One parent should already have a life insurance policy started. We can answer any questions, and help guide you if you aren’t at this step already and need more information.

33. Can you Describe the Risks of this versus an RESP?

This is not an investment. It is a way to control the capital in your life. Recapturing the volume of tax and interest is an example of this control. This volume amounts to 50% of net income for the average person. RESPs are risky because they are directly tied to the volatility of the stock market and taxed upon withdrawal.

34. Are We protected in case the insurance company fails?

Yes, we are protected by Assuris, the non-profit organization endorsed by the government of Canada that protects money people put into Life Insurance.

35. Is this program only for the Wealthy or People who are Financially Savvy?

This program is not only for the wealthy. Anyone with proper discipline can be successful.
By working with us, we take pride in helping you to truly understand the process so you feel comfortable. You don’t have to be great with numbers, the best thing is you can set up the policy, the company will manage it so you can let the dividends and interest grow wealth in your account.

36. Can I make Lump Sum deposit or is this paid monthly?

It’s your choice. you can do either.

37. How is a policy taxed?

There are no taxes if managed properly.

38. What if I need to do more research first?

We recommend becoming familiar with the works of Nelson Nash and reading his book Becoming your own Banker.

To start planning your kids or grandkids financial future.
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