Nelson wrapped up the Human Problems section with a one page chapter on the topic of Use It or Lose It. Mike and Chris venture down into the main principle, EVA, or Economic Value Added. Which is the “recognition of the fact that your own capital has a cost, as well as that which has been borrowed from banks.” Seems simple enough, but as Nelson wrapped the chapter up he states it perfectly, “Just like EVA, to be effective, IBC must become a way of life.”
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This weeks #tbt podcast was originally released January 4th, 2018. The sustainability of Infinite Banking has very little to do with the concept itself, but is a question about the insurance industry itself. I believe this question is rooted in the uncertainty of the federal reserve and our monetary system, and as a result, we feel like the insurance companies must be as unstable as those entities. However, if you take a listen (or read) to this podcast, you’ll quickly realize that the two are not equal. A lot has changed since the original release of this podcast, but the constant is that there is not a more reliable and sustainable vehicle than whole life insurance.
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Chris Bay:
Welcome to the Life Success Legacy Podcast. My name is Chris Bay and I’m joined today with the founder of Life Success & Legacy, Mike Everett. Hey Mike, one of the other questions that we run into amongst the variety of questions that are out there has to do with, okay, once people get to the idea where they’re like, this really makes sense, why would everyone not be doing this? Right? Then they start thinking, well, what if everyone started doing it? Could the life insurance companies handle that? Is it financially sustainable if everyone started doing this? So what I’d like for you to do is talk a little bit about how insurance companies, how they design this, the work that they do, the actuaries do, the engineers of the life insurance companies, and how it truly is sustainable.
Mike Everett:
Well, first of all, life insurance actuaries work with 10 million selected lives. That means that they know how many people are going to die every year, regardless of what’s going on. And they can do this very, very accurately, number one. Number two, I guess I start to think about whole life insurance in the term of IBC, because most people, when they go to buy life insurance, what do they buy? They buy term insurance. So it’s really just a little tiny premium to get a great big death benefit. And that’s the way 90% of the people out there are buying life insurance. So you have 10ish percent that are out there buying whole life insurance, but they don’t understand how the policy can be re-engineered so they can start utilizing their cash. So you think about it from a life insurance company’s standpoint, they’re normally used to getting 300, 500, 1,000, or $2,000 for premium for term life insurance.
And Oh, by the way, term life insurance is one of their most profitable centers. So you think about it from a life insurance company’s standpoint, and you said, is this sustainable if everybody starts doing it? Well, most of the people that we work with, at least a great percentage, their premium amounts aren’t two or three or $4,000 a year. They’re five and 10 and 15 and $20,000 a year. So from a life insurance company’s standpoint, do they want a little money sent to them? Or do they want a lot of money sent to them? The more, the better. So part of the thing is we have to get people to understand that the whole life insurance company knows what they’re doing when they’re designing the policy.
Chris Bay:
So in our culture though, we always hear people talk about high risk investments. You want to get your money into higher risks because you have higher returns, greater returns, those kinds of things. Can you talk about the risk involved in kind of the investment thing? Because life insurance companies are doing something with that money. Right?
Mike Everett:
They are.
Chris Bay:
And isn’t that putting my money at risk?
Mike Everett:
Well, here’s the nice thing. When you work with a hundred year old companies, and all the companies that we work with are more than a hundred years old. That means that they’ve been doing the same thing day in, day out, day in, day out for more than a hundred years. In fact, one of the insurance companies that we work with has paid dividends for more than a hundred years. So they’re not putting any of the money at risk. So what they’re doing is they are taking those premium dollars and they are taking those out and investing them in very, very conservative ways so it’s not putting any of the money at risk.
Chris Bay:
Bonds, things like that.
Mike Everett:
Yeah. Very simple investments. [crosstalk 00:04:15].
Chris Bay:
Things that are [crosstalk 00:04:16].
Mike Everett:
Guaranteed.
Chris Bay:
Yeah. Guaranteed. That’s right. And that’s one of the surprising things to people. It actually was really attractive to me because, back in my days when I was a principal, I remember a teacher came in, would have been in 2008 and she was ready to retire. And then come the spring when the market crashed, she couldn’t retire.
Mike Everett:
The 2008 meltdown.
Chris Bay:
That’s right. And I didn’t know about IBC at that time, but when I heard that story, I filed that away in my head. And I thought, I don’t want my money at risk. I wonder if there’s a way to do, a place to put my money where I can benefit from it. And it’s not at risk like her money was.
Mike Everett:
Yeah.
Chris Bay:
Yeah. So there’s also some regulations with life insurance. Right? That kind of guarantees that they’ve got to have a certain number of reserves and those kinds of things. Can you talk a little bit about that?
Mike Everett:
Well, in the banking industry, I’m going to start with the banking industry. The banking industry, when you put a dollar on deposit at the bank, so you’re saving a dollar, they have the ability to loan out $10. That’s called fractional reserve banking. So here’s the deal. You and I put a dollar in and they’re able to loan out 10. So the question that we always ask is where did they get the $9 to loan out? Well, they got it from thin air because the federal government, the federal reserve, said that you guys can do this. If you get a dollar in, you can loan out 10. Now you think about that from a customer’s or a client’s standpoint. Is their money at risk. Yes, it is. There is so much stress on that money. That’s why you hear about banks going down all the time. A life insurance company, on the other hand is when you put a dollar in, they have to have a dollar set aside for death claims and the life and death claims, dividends, et cetera, et cetera. So there is absolutely zero stress on that money at all.
Chris Bay:
So when a person, let’s say that Joe, we’ll just take Joe as a name. Let’s say that Joe is issued a policy. At that point, day one, if he were to pass away, that company has to have the ability to pay that death claim. Right?
Mike Everett:
Yes, they do.
Chris Bay:
Okay. And they’ve got to have, by law, they’ve got to have reserves.
Mike Everett:
That’s correct.
Chris Bay:
Can you talk a little bit about that number? The amount of reserves and then also really the companies that we work with and how safe they are.
Mike Everett:
The average life insurance company is required by law to have at least a hundred percent in reserves, a hundred percent. So that means that you have to have a hundred percent of the money set aside so if everybody dies on the same day, guess what? We can pay a hundred percent of the death claims.
Chris Bay:
Even in a catastrophic event.
Mike Everett:
Even in a catastrophic event.
Chris Bay:
They have to be prepared for that.
Mike Everett:
That is correct.
Chris Bay:
Yeah.
Mike Everett:
But the companies that we work with have 600 plus percent in reserves. They have six times more than anybody else out there in order to make sure that there is absolutely zero stress on your money plus the fact that they can actually guarantee that they will honor the contract that they have made with you through whole life insurance.
Chris Bay:
Yeah. It just came to mind, a lot of times and what’s out there in terms of financial conversations and stuff, the term diversification comes up, and people will ask from time to time, they’ll say, well, Chris, don’t you diversify? And my way of thinking is, well, the reason that we diversify a lot of times is because there’s risk.
Mike Everett:
That’s correct.
Chris Bay:
But if there’s no risk involved, is there a need to diversify?
Mike Everett:
None.
Chris Bay:
None.
Mike Everett:
Zero. Nada.
Chris Bay:
Now, if I have cash value, I can use that for a lot of different reasons. Right?
Mike Everett:
Absolutely.
Chris Bay:
What are some of the ways that people utilize their cash value?
Mike Everett:
Well, we show them how to take policy loans against their policy to pay off credit card debt, to pay off student loan debt, to pay off auto loans, and even mortgages. So imagine if we were able to actually utilize a policy loan to get somebody debt-free how simple would their life be?
Chris Bay:
Okay. So one is turning the wind current that we’ve talked about in previous podcasts.
Mike Everett:
That’s correct.
Chris Bay:
That’s one. What are some other ways that people use their cash values?
Mike Everett:
Well, some of the, sometimes what they do is they use them to go on vacation. They use them to pay for their kids’ college.
Chris Bay:
So living expenses.
Mike Everett:
That’s exactly right.
Chris Bay:
So once you’ve paid off debt, you can then utilize it for what we talk about the second pillar. And that is financing your life. Right?
Mike Everett:
That’s correct.
Chris Bay:
What about businesses? Business opportunities?
Mike Everett:
Well, it’s amazing when you have a pool of cash available business opportunities find you, so you’d have the freedom to be able to invest so to speak in another business, whether it be real estate or whatever you choose.
Chris Bay:
Nelson talks about the golden rule in his book. What’s that golden rule mean?
Mike Everett:
Those who have the gold, make the rules.
Chris Bay:
That’s right. So there’s opportunities for people. And we have clients like this that they have started business opportunities, utilizing their cash value and their policies. They’ve taken loans to start businesses. They’ve used it for real estate. And let’s just say, somebody loves the stock market.
Mike Everett:
They can go do that too.
Chris Bay:
Couldn’t they borrow from their policy, against their policy…
Mike Everett:
Yeah. That’s correct.
Chris Bay:
… take a loan against their policy and go invested in this great stock that they heard about, they got a tip about? They’ve got the guaranteed growth from their policy, plus the death benefit. Right? And yet they can still take a loan against their policy and go and invest it in this great tip that they got.
Mike Everett:
Absolutely.
Chris Bay:
So there’s all kinds of ways that they can do it and limit their risk factor and actually be safe with their money as well. And have lots of flexibility with it. Well, Mike, thanks for talking through that. A lot of people wonder if it is sustainable, if everyone started doing it. And clearly as you’ve explained, it’s very safe. Life insurance companies are built for this kind of thing. Please join us in future podcasts. I’m Chris Bay joined today by Mike Everett, the founder of Life Success & Legacy. Check out our website by the same name, Live Success, and Legacy. If you have not read Nelson Nash’s book, Becoming Your Own Banker, you can get a copy of that on our website. We highly recommend that you educate yourself in reading that book and utilizing some of the other resources we have on our website.
Nelson states, “This phenomenon probable limited the achievements of mankind more than anything else. When this ‘thing’ infects us, we stop growing, stop learning. We turn off or tune out the ability to receive inspiration — because we ‘already know all there is to know.'” If that doesn’t make you stop and ponder for a moment…
Nelson was right, though. Our ability to learn and grow is almost always hindered by our human nature, or the arrival syndrome. Watch and listen as Mike and Chris go deeper into this incredibly short, but packed chapter about that ‘thing’ that is infecting us. You will certainly walk away glad you did!
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In this #tbt post, Mike and Chris talk through a question we get all the time. Is Infinite Banking too good to be true? Honestly it’s a question most of us have asked too! Take a listen to this podcast, and we feel you will be pleasantly surprised that our goal is not to ‘prove’ someone right or wrong, but it is to educate and re-educate. Skepticism is expected, and even welcomed! Enjoy this gem of a show!
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Chris Bay:
Welcome to the Life Success & Legacy podcast. My name is Chris Bay and I’m joined today with the founder of Life Success & Legacy, Mike Everett.
Hey, Mike. In all the conversations that we have with people, there’s several questions that continually come up. We talked about another one in a different podcast earlier. The one I want to tackle right now is pretty common. And it is once people start to learn about this, especially after they’ve come to one of our boot camps, they say, “This sounds too good to be true.” Right?
Mike Everett:
We hear that all the time.
Chris Bay:
All the time, yeah. So when you first learned about IBC, you read the book and everything. Did you have the same feeling?
Mike Everett:
Well, being an entrepreneur, I didn’t have the same feeling because I always look a little bit on the super positive side of everything. So after I got done with the book, the second time, I literally thought I’m leaving a career and I’m doing this full time because it did sound too good to be true. But I thought, okay, I was 50 years old. I’d been doing what everybody else was doing. I was putting money into my 401K, my IRAs and mutual funds. I even had a stock account, but yet wasn’t getting ahead. So there was a part of me that said, “Yeah, it sounds too good to be true.” But there was a part of me that goes, “Wow, if this thing works…”
Chris Bay:
Well, let’s be real. Knowing different personalities and such, your personality is going to be a quick start. I mean, you’re going to see something and you’re going to process it in the snap of fingers. You’re like, “This works. I want to get into this. Let’s go.”
Mike Everett:
Yeah, let’s go.
Chris Bay:
But not everybody’s like that.
Mike Everett:
That’s right.
Chris Bay:
Present company included.
Mike Everett:
That’s right.
Chris Bay:
So for some people it’s not this, “Wow, I’ve tried all this.” Not everybody was at the stage of life where you are when you were introduced and not everybody’s had a chance to try all those things. And so, all they’ve heard out in the media and in the financial thinking is different ways to manage money. Then they get introduced to IBC and the common question is, “It sounds too good to be true.” Right?
Mike Everett:
That is true.
Chris Bay:
So talk to us a little bit about those kinds of things. When people come to us and they say, “It sounds too good to be true.” How do you talk to them about it?
Mike Everett:
Well, I get back to some pretty basic stuff. Is number one, you got to think long term. You hear that thing, if it sounds too good to be true, it probably is. Well, we take a different approach and we think you ought to do some more research and spend some time with us and let us educate you. Because if we can somehow educate you, you’re going to be able to see IBC in a different light. And one of the things that Nelson has said that is IBC is caught not taught. There’s a certain portion of us that can learn that, but there’s a certain portion of you that says, “Golly, this just sounds right.”
Chris Bay:
That’s how it was for me. But it took me a long time to get to that point. And part of my, I mean, just being honest, part of my stumbling block was that it used whole life insurance. And from my previous exposure to financial information, whole life insurance was the worst place in the world to put money.
Mike Everett:
We hear that all the time.
Chris Bay:
Absolutely, right? So we tell people to research it. We tell people to educate themselves. We tell people to come to our boot camps, go to our websites, all those kinds of things. Right?
Mike Everett:
That’s right.
Chris Bay:
Now, do you push people to make a decision?
Mike Everett:
No, absolutely not. We want people, we want husbands and wives, we want partners to be fully on board with each other.
Chris Bay:
Talk about that husband and wives thing.
Mike Everett:
Well, I’ll tell you what I learned. I learned the hard way. Me, being an entrepreneur type, one of the things I want to do is just get out and talk to people. I want to talk to anybody and everybody about IBC. That’s how excited I am about this. But learning that the hard way was tough for me because sometimes I would just go and see just the husband or I would just talk to the wife and I can tell you exactly what’s going to happen. Is if I talk to one without the other, I’m going to have to tell the other one the same exact thing and spend the same exact amount of time with them again. So we really believe that husbands and wives are going to do this together. They are going to share in the experience before they proceed. We will not talk to one spouse or the other without the other one.
Chris Bay:
I just had a conversation with somebody recently and it was the husband and we were talking about IBC and he was wanting to meet. And he’s like, “Yeah, my wife trusts me and all that.” And I said, “Let me give you an example. Let’s say that your wife and you have talked about doing some counseling, okay? And your wife goes to a counselor and they’ve had maybe three, four sessions. So they’ve developed some rapport. They’ve gone a little deep. They’ve had those conversations and then they invite you to the next session. How effective is that going to be? How comfortable are you going to feel? Right? Is there going to have to be some going back and covering some groundwork with that?” And this is the same thing.
Mike Everett:
Yeah. That’s why we don’t push the sale.
Chris Bay:
We don’t. And we really are pushing for mutual purpose, mutual understanding with the couple. And it doesn’t mean that both parties have to know every cell of every spreadsheet and all that, but we want to help them get on the same page because we talk about this all the time, this is so much bigger than just numbers.
Mike Everett:
It is.
Chris Bay:
And what is one of the top stressors to a marriage?
Mike Everett:
Money.
Chris Bay:
Absolutely. So if we can take away, or at least reduce one of those key stressors in a marriage, how much power does that give to a couple?
Mike Everett:
It is truly unbelievable. My wife and I have experienced it ourselves. And I know that you guys have as well.
Chris Bay:
Absolutely. Yeah, that’s good.
It’s interesting when, we do our boot camps, this is almost a quote from your mouth. You say, “We want you to be skeptical.”
Mike Everett:
Absolutely.
Chris Bay:
Why do you say that?
Mike Everett:
Well, part of it is, if somebody comes in a little bit skeptical, what we’ve got to do is we’ve got to educate and then we’ve got to educate again. And then we’ve got to educate again, because we believe that education is the key piece to why somebody would think that Infinite Banking would even work. Because we were taught to be skeptical about everything with our money.
Well, what we’re doing is, in this education piece and this, we are teaching people. We are empowering people in a way that no other financial group is doing throughout the entire U.S.
Chris Bay:
Yeah, when people come to our boot camps and they see us wearing shorts and tennis shoes and we’re goofing around and having fun, talking about money and things, they’re always a little surprised, but it’s refreshing. People laugh. They leave having… They’ve had a good time. They haven’t felt pressured. And they feel like they walked away with a new perspective on money and really with hope.
Mike Everett:
Well, this is why we offer every other Tuesday, a webinar free of charge, regardless of what state or where you’re at in life. We offer those every other Tuesday, you ought to go to lifesuccesslegacy.com and check out, under bootcamps, and find out when our… Tuesday evening from 6:45 to 8:00 PM Central. It’s unbelievable.
But when we aren’t doing our Tuesday evenings, we do these boot camps. We do a boot camp one, which is really just a gigantic book review. And then we do a boot camp two, but this is where we offer people a live version of exactly what we do. But we do it in a fun, no pressure atmosphere, where you can ask questions. You can be skeptical. You can throw things at us if you want to. We want people to be skeptical. We want them to think, “Golly, this just does sound too good to be true.” But once they get in and they find out that they can control things in their own way, it’s unbelievable what happens.
Chris Bay:
Yeah, so it really is too good to be true, isn’t it? It actually is true and it is good.
Mike Everett:
That’s right.
Chris Bay:
That’s right.
Well, thanks for listening. Again, we point you to our website, lifesuccesslegacy.com and check out some of our other resources that we have there. I’ve got some other podcasts for you to check out as well. Thanks again for joining us.
In this #tbt episode Mike and Chris break down the reasons so many of us have never heard of Infinite Banking. Mike separates it into three main points: 1. Nelson didn’t write Becoming Your Own Banker until 2000. 2. There aren’t enough IBC practitioners. 3. Third, it takes time and energy to educate yourself about IBC. This includes potential clients and agents. In other words, it’s too time consuming.
What can we learn from this? Well, if you want to be the one in charge and control of your own money and financial future, you have to educate yourself. You can’t rely on the ‘old way’ of thinking and expect different results than what we’ve all been subjected to for years. The other take-away; using whole life insurance as a cashflow vehicle isn’t new. It’s just that we’ve never been taught about its power, until now.
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Chris Bay:
Welcome to the Life Success Legacy podcast. My name is Chris Bay and I’m joined today with the founder of Life Success & Legacy, Mike Everett. Hey Mike, over the years as we have talked with people about the Infinite Banking Concept, there’s lots and lots of questions that come up. There’s one that we hear frequently, and that is why haven’t I heard of IBC before, right? Have you ever heard that before?
Mike Everett:
I’ve heard that so many times, it’s unbelievable. Yeah.
Chris Bay:
And it’s a legit question, right?
Mike Everett:
It is.
Chris Bay:
Personally, I had never heard about it until, back in the day when I was an elementary school principal and I went to one of my dad’s, who was a business owner in town, and I said, “How do you manage your finances?” And he said, “Have you ever heard of Infinite Banking, IBC?” I said, “No.” So right there, I was thinking, why haven’t I heard of this? Why has no one taught me this?
Mike Everett:
Well-
Chris Bay:
You hadn’t heard of it either right?
Mike Everett:
No, I hadn’t.
Chris Bay:
Yeah.
Mike Everett:
Well, there’s several reasons probably why people haven’t heard about it. Number one, Nelson didn’t write his book, Becoming Your Own Banker, until 2000. What he did though, was he utilized the Infinite Banking Concept for about 20 to 30 years prior to writing his book because he wanted to know that it worked. Secondly, there’s not enough practitioners, guys like us, who are effectively teaching the Infinite Banking Concept. Third, most of the people, and this includes potential clients and advisors, don’t take the necessary time to educate themselves and understand the true power of Infinite Banking or IBC.
Chris Bay:
Right, right. Now, let me ask you this. You and I had not heard about Infinite Banking beforehand and Nelson hadn’t written his book until 2000, but were people or organizations or somebody out there using the concept in general and then Nelson added to it? Corporations were using this, right?
Mike Everett:
Absolutely. Absolutely.
Chris Bay:
Can you talk a little bit about that?
Mike Everett:
Well, individuals, corporations, businesses have been using this for centuries, actually. All that Nelson did was, he refined the process through Becoming Your Own Banker in the Infinite Banking Concept. And all he did was he learned that there was a better way to engineer or reallocate the money inside the life insurance policy. It’s really that simple.
Chris Bay:
Yeah. So I always think about Nelson, the key pieces that he added is he looked at how a dividend paying whole life insurance policy could be designed more effectively for financing our own needs.
Mike Everett:
Yeah.
Chris Bay:
So that was one of the things. And then he brought that together for a common people and taught banking concepts along with it. And that’s really what he’s done for us.
Mike Everett:
Well, and the crazy thing about it is, the question is why haven’t I heard about IBC before? Nothing in our conventional financial wisdom leans towards this. Nothing. But yet, all it is is taking a 250, 260 year old product and re-engineering the way the policy works and making it so the individual, the company, the corporation can learn how to control their own money by investing in themselves.
Chris Bay:
So I’m going to ask you a different question now. I haven’t heard about it and we’re saying conventional financial wisdom out there is teaching other things. Why is the financial institutions out there, financial planners, investment companies, all those kinds of people, why are they not teaching this concept?
Mike Everett:
Because they won’t make as much money, and they’re not taking near, near enough time to educate themselves. It’s too much work.
Chris Bay:
You know what I love about IBC personally? Is that it is about autonomy. It’s about me having control of my money and not everybody wants to take that control. When you look at traditional financial planners and that kind of thing, it’s managed money. It’s me giving control to somebody else.
Mike Everett:
You have given all of the control to somebody else. And that kind of just goes back to the thought process is, we know that this isn’t for everybody and we’re okay with that. So the question that we always ask people is, where do you store and invest your money?
Chris Bay:
Yeah, that’s a good question to ask.
Mike Everett:
Yep.
Chris Bay:
All right. Hey, thanks for spending the time. For those of you listening, check out some of our new podcasts coming up. As always, we encourage you to go to our website, lifesuccesslegacy.com. Got a lot of resources on there available to people. Check it out.
In this #tbt we wrap up the Policy Design discussion by going into the details of what Nelson discovered. So many of us buy life insurance for just the death benefit and never think of the possibilities that lie within that contract. Mike continues to challenge us and asks which is more important to you today; cash or life insurance death benefit. It’s always cash. But using this tool we can not only gain incredibly flexible access to cash, but we also get to continually grow the death benefit for those we love and care about. Take a listen, this is an excellent episode that keeps reminding us that we must change our way of thinking.
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Chris Bay:
Welcome to the Life Success Legacy podcast. My name is Chris Bay, and I’m joined today with the founder of Life Success & Legacy, Mike Everett. Mike, in our last podcast we started to talk about the policy design for Infinite Banking. And one of the phrases that you used is, “What’s more important to people? Is it cash, or is it death benefit?” And obviously, for most of our life, cash is more important than death benefit. So now what we want to do is dig in a little bit more into how we design the policies to emphasize the cash value, and then how that is utilized to, for example, turn the wind current, or, people use their cash value for investment purposes, retirement purposes, a variety of things. So can you talk a little bit about the two pieces of a policy design, and what I’m getting into is the base portion and typically what it generates, and then the paid-up addition portion and what it generates.
Mike Everett:
Okay. Traditionally, once again, life insurance was designed almost 100% for death benefit. So one of the things that Nelson discovered was, if you can reengineer or rearrange the way the premium is allocated internally with the policy, there are these two pieces that you’re talking about. We have the base premium. The base premium purchases almost 100% of the death benefit in the life insurance contract. So basically what you’re doing is, you’re taking a certain percentage of the premium and you’re allocating it to what we call the base premium.
Chris Bay:
So in a traditional life insurance policy, most, if not 100% of that premium, is going to go to base-
Mike Everett:
That’s true.
Chris Bay:
… and so it’s going to be 100% going towards death benefit.
Mike Everett:
That’s correct.
Chris Bay:
Okay. So how is this different?
Mike Everett:
Well, then Nelson realized that there was a way to actually create cash in your life insurance contract by adding a piece called the paid-up additions rider. This paid-up additions rider, what it does is it creates almost 100% cash value available in the contract that people can access. Now, there is a certain portion that purchases a little bit of death benefit. Remember, it’s a life insurance contract, but yet, I asked the question again, what’s more important right now, cash or death benefit? We’ve all said cash. We’ve said this a number of times, but we want to reiterate this to the people listening because cash is king, and if we can get access to that cash in some sort of way, and still have the life insurance contract in place, why wouldn’t a person want to do this?
Chris Bay:
Let’s put this into specifics for people. Let’s say that I come to you and I say, “Hey, I want to start an Infinite Banking concept policy. And I want to be able to put, I’m going to say, $10,000 annually into this policy.” Break that out for me, then. If I’m putting money into it, when do I get access to the cash value that I can then utilize for turning wind current and other things?
Mike Everett:
Well, if you were going to put $10,000 in, then there’s a certain way to allocate these dollars. So what we’re going to do is we’re going to take 40% of those dollars or $4,000 of that 10,000, and we’re going to buy the base portion of the policy. Then we’re going to take $6,000 or 60% of those dollars and buy the paid-up additions rider. Now, the easiest way to explain the paid-up additions rider is the Apollo rocket. You know, when it goes up into space, it gets up into space and it’s on the Apollo rocket. It’s got these turbo boosters. Well, after they get up into space, what do they do with the turbo boosters?
Chris Bay:
They drop off.
Mike Everett:
That’s exactly correct, but they need those two turbo boosters to get the rocket up into space. With the way that Nelson created the Infinite Banking concept, you need the turbo boosters or the paid-up additions rider in order to get this thing up and going.
Chris Bay:
So it’s flooding it with cash.
Mike Everett:
That is correct. Now, your question was, when do you have access to that cash? With the companies that we utilize, you can have access to that cash within the first month of starting your Infinite Banking Concept policy.
Chris Bay:
Now, when you say that you’re talking about an annual premium, so someone would pay the full 10,000 upfront.
Mike Everett:
That’s correct.
Chris Bay:
We also have clients who, for various reasons, they decide to do a monthly premium. So would they get access to that money right away?
Mike Everett:
They would not.
Chris Bay:
Okay.
Mike Everett:
Because, the way you explain that to people is, if you were going to write a check on your checking account, how much can you have access to? With whatever you’ve got in there?
Chris Bay:
Right.
Mike Everett:
So if you have somebody who pays an annual premium, they have access to their portion or their 60% of their policy when they pay that premium in the first 30 days. But if you have somebody who goes on a monthly plan, it’s going to take them the full 12 months or annual premium of monthly payments in order to have access to those dollars. In the great big scheme of things, it doesn’t make any difference.
Chris Bay:
Yeah. Yeah. So, if I understand correctly, when we put a chunk of money in, I’m going to get access, or I can borrow against my policy-
Mike Everett:
That’s correct.
Chris Bay:
… and really that’s a loan. It’s called a policy loan, but it’s not really money from my policy. It’s really a loan from the company.
Mike Everett:
That’s true.
Chris Bay:
And they’re using my policy as collateral, which is an unbelievable trade of this is that our policy stays fully intact and it continues to compound and grow for us on the full, let’s say it’s $10,000, even though I’ve pulled out a loan for $6,000.
Mike Everett:
That’s correct.
Chris Bay:
So, we’re never interrupting the compounding interest of our policy.
Mike Everett:
Eighth wonder of the world.
Chris Bay:
It’s unbelievable. Now, some people might say, “Well, I just put in 10,000 and I’m only getting access to six.” Well, let’s talk about capitalization and thinking of our policies as businesses a little bit.
Mike Everett:
Well, we’re going to go back to Nelson’s three main principles. Number one, you’ve got to think long-term. Remember, Nelson was trained as a forester, so he thinks 20, 30, 40, 50 years in advance. Infinite Banking is a long-term thought process, so we tell people, “If you’re not in this for the long haul, this is not a good thing for you.” But number two, you can’t be afraid to capitalize. That means that you have got to put some money into this thing in order for it to work. If you think traditionally about life insurance, and it doesn’t matter if it’s term or whole life or universal life, most of the financial gurus out there say, “Let’s buy as much death benefit as we can and put as little premium in there as we can.” With Infinite Banking, it is completely opposite. We’re wanting to flood this thing with as much cash as we can get and get as little a death benefit as possible in order for you to be able to access the cash efficiently in your own life.
Chris Bay:
In fact, we call our premiums, premium deposits because it deposits into a banking system, really, that we own and control. So, if it’s a deposit into your banking system, do you want that deposit to be a little or a lot?
Mike Everett:
I want it to be a lot, but we need to be careful here because, this is called the Infinite Banking Concept. But we want to reiterate that we’re life insurance guys, and you are purchasing a life insurance policy. And in that purchase, you are creating absolute control of that contract. So you get to decide or control where 100% of that investment goes when you access that cash through a policy loan.
Chris Bay:
Okay. I want to take you back to your analogy of the space shuttle.
Mike Everett:
Correct.
Chris Bay:
Or the Apollo, or whatever it was that you used. And you talked about those booster rockets falling off. And that is what we call the flexible paid-up addition rider.
Mike Everett:
Correct.
Chris Bay:
That flexible piece is an important word. And you talked about, on the rocket, those falling off. Does the flexible PUA, the paid-up addition rider, do those ever fall off the policies, and why?
Mike Everett:
Well, once again, it’s called flexible because you have the flexibility of deciding what you want to do with that. We personally would like people to leave that flexible paid-up addition rider on there, but we can adjust the premium or keep it flexible enough to where you have a place to put some additional cash if you want to. Or you can actually reduce that to a minimum flexible paid-up addition rider payment of $100. Remember earlier we talked about 6,000, but then it goes to a hundred. So that creates a whole bunch of cash flow on your side of the fence, so to speak, when we help you understand how the policy is designed.
Chris Bay:
Yeah. It’d be easier if we had some visuals for people to teach them this next concept. But in theory, if we think of our policies as businesses.
Mike Everett:
Correct.
Chris Bay:
And let’s say we’re in the business and let’s use McDonald’s as an example. Obviously McDonald’s started with one restaurant. Well, now they’re everywhere across the world, right? They franchised them. So if we think of our policies as businesses, are we able to franchise our policies?
Mike Everett:
Absolutely.
Chris Bay:
Nelson, I think, we know this. I’m not sure he says it in his book, but at one point he had 49 life insurance policies.
Mike Everett:
That’s correct.
Chris Bay:
And I think you’re up to what? 17 now?
Mike Everett:
Chris Bay:
Yeah. And in, gosh, seven years, I guess of doing my plan, we’re up to six policies. Explain to people why in the world would they want to start adding additional policies?
Mike Everett:
If you look at your policies as a business and your one policies or two policies or three policies are doing well, why wouldn’t you want to go and start more? All we’re trying to do is create a system to where you control 100% of your own cash flow. So, bottom line is, Nelson on page 48 talks about expanding the system to accommodate all your income. He’s helping people think through, why in the world would you want to continue to build policies? But the way we design the policies is, your policy is going to get better every year, regardless of the economy, regardless of the financial landscape in our country. So if that’s true, why wouldn’t you want additional policies at certain time periods as you’re growing this thing?
Chris Bay:
And, theoretically, we’re able to show people that they could actually start a additional policy of roughly the same size every five years without any additional cash out of pocket.
Mike Everett:
That’s true.
Chris Bay:
And so, eventually, aren’t they going to be capped on how much life insurance they could get?
Mike Everett:
There’s a possibility of that happening, but it really takes a large number of years. 15, 20, 25 years before they really need to worry about that.
Chris Bay:
Okay. And obviously we coach people through all of that.
Mike Everett:
That’s correct.
Chris Bay:
That’s part of the strategic planning that we do with people. My great topic, for some people this may be a little too much in the weeds for them, but I think there’s probably some folks out there that, I know this for a fact, that they like to understand the design of the policy and why it’s different than a traditional life insurance policy would be designed. In the future podcasts, what we’d like to do is get into some of the applications of how people are utilizing their policies in their life for the different ways that they do that, whether it’s for business, addressing debt, college financing, things like that.
So, to our listeners, thanks for joining us. Lots more information on our website at lifesuccesslegacy.com. If you haven’t got yourself a copy of Nelson Nash’s book, Becoming Your Own Banker, you can get that at our website as well. We encourage you to read it. Come back and join us again.
In this weeks #tbt, Mike and Chris go into more details about the types of life insurance, why most people buy life insurance, and how Nelson, through his own struggles, came to realize the true power of whole life insurance. This part 1 of policy design does really give context to how Infinite Banking works and really challenges us to think beyond death benefit. Take a listen, heck, read the transcript, this one will have you clamoring for part 2!
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Chris Bay:
Welcome to the Life Success & Legacy podcast. My name is Chris Bay, and I’m joined today with the founder of Life Success & Legacy, Mike Everett.
Mike, we’ve talked in previous podcasts about how Nelson came to discover that whole life insurance, if designed properly, can be an unbelievable tool for really privatized banking, and controlling your own finances and all that. So, what we’d like to accomplish in this podcast is to educate people about different types of life insurance, why whole life insurance is the tool to be used, and why is this type designed differently for the purposes of Infinite Banking? So to begin with, can you just kind of give our listeners a broad perspective on the different types of life insurance that are out there, and why people buy life insurance?
Mike Everett:
Well, traditionally, life insurance was bought for one reason. It was bought for death benefit. If you go back, I’m going to say 40, 50, 60, 70 years, there was really numbers of different kinds of products out there in the life insurance industry, but the only difference was the design of what was going on. Some people, if you go back to my grandpa’s era, what they did was they bought whole life insurance and they bought it for death benefit. What they planned on doing was, they just planned on putting money aside just like you would for a savings account, but they just stored money into a life insurance policy.
There were all kinds of products out there. There was a 20 pay life. That means that you could pay the premium for 20 years and then it was paid up for the rest of the time. There was life paid up at 65. So you paid the premium until age 65, and then the policy paid for itself. Then you had your ordinary life or permanent life insurance, and you paid the premium all the way up to age 99. Basically what happened was, in all of those policies, the traditional life insurance policy, which was bought specifically for death benefit, the policy endowed at age 100. Meaning the death benefit amount and the cash value amount were equal amounts. What they did was, they turned around and they gave you the cash and said, “Hey, thanks a bunch for paying on this thing and thanks for not dying.”
Chris Bay:
I know from my past history in finances, personal, we were following some teachings of Dave Ramsey. Dave is famous for encouraging people to buy term and invest the rest. So can you just talk about term life insurance?
Mike Everett:
Term life insurance is exactly like renting an apartment. You’re basically renting your life insurance policy for a certain time period. There are all kinds of time periods that you can do. You can do annual renewable term. That means that you pay the premium every year and every year the premium goes up. It’s called attained age. As you get older, what happens to the cost of life insurance? It goes up because you’re just a little bit closer to death. That’s annual renewable term. You can get 5-year level, 10-year level, 15, 20, and even up to 30-year level.
If you think about it from an insurance company standpoint, the insurance company offers term life insurance for whatever time period you choose. Five years, you pay the premium for five years and at the end of five years, the premium goes up and you choose another term. 10 years, 15 years, 20 years and so on. If you think about it from a life insurance company standpoint, they just want you to pay your premium. They’d like you to not die. Right before you die, what they’d like you to do is, they’d like you to cancel your life insurance. Term life insurance is the number one profit center of most life insurance companies out there. So why wouldn’t they do that?
Chris Bay:
Yeah, so Infinite Banking obviously does not use term.
Mike Everett:
They do not.
Chris Bay:
You mentioned earlier that term life insurance is kind of like renting life insurance.
Mike Everett:
That’s correct.
Chris Bay:
So if we make that correlation to our living situations, if we’re renting, we’re not building equity.
Mike Everett:
That’s correct.
Chris Bay:
Okay. So then the option is then whole life insurance, and that’s kind of like buying a house where you’re building equity and that equity, we use the term cash value. Can you talk a little bit about whole life insurance and the cash value piece and why that is so important to the concept of Infinite Banking?
Mike Everett:
Well, this is one of the awesome things that Nelson discovered was, he realized through his own trials and his own tribulations, that there was a way that he was building equity. What ended up happening was, he had incurred a tremendous amount of debt. At the time that this had all come due, interest rates had soared extremely high, like 18, 19, 20, 21%. He realized that he had all kinds of equity, or all kinds of value in his life insurance policies, that he could tap into.
Instead of borrowing the money from traditional financial institutions at 18 to 21%, he was able to go to his life insurance policies and do a policy loan. Borrow against the cash value of his life insurance policy and be able to pay off some debts that he had out there. This is exactly what Nelson discovered in his book, Becoming Your Own Banker.
Chris Bay:
So, with a whole life insurance policy, you’re building equity, which can be borrowed against from the life insurance company and then utilized for many different purposes.
Mike Everett:
Correct.
Chris Bay:
Can you talk a little bit about the design of the whole life policy, because the traditional whole life policy… If I went down to some life insurance company and said, “hey, I want X amount of coverage.”, they’re going to design the plan a certain way, but if you went to an Infinite Banking coach, they’re going to design it differently. What are those differences?
Mike Everett:
In a traditional life insurance format, you’re buying literally a hundred percent death benefit. One of the questions that we ask every potential client is, “if we had to ask you right now, what was more important to you, cash or life insurance death benefit, what would you say?”
Chris Bay:
I’m going to say, “cash.”
Mike Everett:
It’s cash every single time. What if there was a way to design the policy where you could have both in ample supply? You would not only have death benefit, but you’d have the cash that you need now. We need cash from right now until the day we die. We only need death benefit one day. What if there was a way to design the policy to emphasize the cash value now, still get a death benefit, but yet really, we need the death benefit 20, 30, 40 years from now, not today. This, once again, was the beauty of what Nelson discovered. He realized there was a way to completely re-engineer the policy to work for you today and still have the death benefit when you needed it 20, 30, 40 years from now.
Chris Bay:
In the middle of Nelson’s book, Becoming Your Own Banker, he uses an example of a business person. He’s an equipment finance person, and he shows a couple of examples. One is first, this business owner simply putting money into his policy and just letting it be life insurance. It turns out to be a really incredible result for him. Then what Nelson shows is, if he actually uses the cash value of his policy and takes loans and utilizes that to finance his business expenses in his life, that he actually ends up with a better result. Simply by using his policy to finance everything in his life. That, sometimes for people, is a hard leap to make.
We always encourage them. If you think like a banker… In fact, in our boot camps, we say, “we’re going to remove your brain from your skull today and we’re going to replace it with a banker’s brain.” We want you to think like a banker. How do banks make money? If we can apply that to utilizing their own whole life insurance policy, but having it designed to emphasize the cash value portion versus the death benefit, it’s an unbelievable tool for banking.
Mike, thanks for explaining some of the ins and outs of life insurance. This is a topic that I think is going to take a little bit more explaining. I think what we’ll do is do another podcast that digs in a little bit deeper. We’re going to talk about the base portion of the policy. We’re going to talk about the paid-up addition portion of it and how those policies really can be thought of as businesses and how we can actually franchise our policies. Thanks for the information. Listeners, thanks for joining us and catch us on our next podcast.
In this episode Mike and Chris dive into Willie Sutton’s Law. Nelson had a lot of well thought out opinions on things. So why does he follow up the Human Problems with a chapter about a notorious bank robber? Well, I will steal from Nelson (via Willie), “Wherever wealth is accumulated someone will try to steal it.” Watch, listen and enjoy this first episode of 2021!
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The first chapter of Section 2 is the Human Problems… Gulp. Nelson knew it was important to tackle this topic first, because we all struggle with these issues. The whole chapter is one page, but it’s a packed one page! Take a listen to how Mike and Chris dissect the human problems and even give examples of their own personal struggles.
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