Life Success & Legacy FAQ’s
Why haven’t I heard about IBC before?
Here are several possible reasons you haven’t heard about IBC. First, Nelson Nash didn’t write his book, Becoming Your Own Banker, until 2000. Second, there are not enough IBC practitioners effectively teaching the Infinite Banking Concept. Third, most people will not take the time to educate themselves properly to understand the power of IBC. This includes advisors and potential clients. Lastly, conventional financial wisdom teaches us to store and invest our money where we lose control of it. Where do you store and invest your money?
So how does IBC work exactly?
To begin, you need a place to store your cash. Right now you probably use a checking or savings account. In its simplest form, utilizing an IBC strategy means you would save up a pool of cash, borrow it from yourself (instead of the bank) to buy something you were going to buy anyways (a vehicle, for example), then repay yourself the same monthly payment (including interest) you would have paid otherwise.
It turns out, there is a much more efficient and productive financial asset that can be used to do this besides a typical bank account. The safest, most efficient way to store cash is by using a specially designed dividend-paying whole life insurance policy from a mutual company. This asset is what makes IBC really attractive. Using the same basic idea above, the dividend-paying whole life insurance policy adds a guaranteed growth rate, a death benefit, and a non-guaranteed dividend. Unlike your savings account, the guaranteed growth and death benefit are not taxed. Though the dividends are not guaranteed, they have always been paid out every year to the policy owners by the companies we utilize. Who got the dividends at the end of the year for the bank account you are currently using to store your cash? THE BANK.
Once you have created a pool of cash you control using a dividend-paying whole life insurance policy, you now have freedom to:
- pay off outside debts
- finance items you were going to purchase anyways
- fund investments
Whenever you want to take one of these actions, you request a policy loan against your policy to access the cash, and then begin making payments back to yourself just as though you had borrowed the funds from a bank. Because you control the asset, you control the payment schedule. When was the last time your controlled anything when financing a purchase?
How does one start an IBC policy?
This is a fun process. No, seriously. When you are the bank, it really IS FUN! The first step is education. Read Nelson’s book, Becoming Your Own Banker. Attend one of our boot camps or webinars. They are free with absolutely zero pressure. Next, we want to hear what you would like to accomplish in your life. We take this information and design an IBC Strategy that meets your needs. Again, at no charge. Would you spend ZERO dollars to see what might be possible?
How do others typically fund their IBC policies?
The process of funding is called “capitalization”, and there are a variety of ways people do this. We find that while each situation is unique, everyone has leaks in their cash flow system simply because we have been taught so little about money. Once you begin learning how to think like a banker, we can begin to show you how to be more efficient utilizing your existing cash flow. Many people will have activators, money sitting somewhere unutilized that they would like to put to use. These include savings, bonuses, tax refunds, investments, windfalls, home equity, extra payments on debt, and more. Some even store cash away for Christmas, repairs, back-to-school purchases, and the like. These are great candidates for creating your system and then re-using those dollars for their original intent. Now you’re getting more than one use out of your dollars! If you think this seems impossible in your situation, you might be right. But you won’t know for sure until you give it a chance. We specialize in helping people think differently and making more efficient use of their money. Wouldn’t you like to get your dollars to do more than one job?
This is starting to sound good - too good. What’s the catch?
As our good friend, Todd Langford, likes to say, “If something sounds too good to be true, then do more research.” We believe IBC is caught, not taught. Meaning, you have to see it and understand if for yourself. We do not try to sell anyone on anything. All of our clients come to us asking us how to do this. We teach. We empower. We facilitate. That’s it. We even want husbands and wives to be in agreement on this before proceeding. We do not try to push a sale, ever. This is a life-time strategy, and we encourage people to take the time they need to decide what they want to do.
It is completely normal to feel skeptical because we have been taught to guard ourselves when it comes to money. Everyone on our team was first an IBC client, and we all did our research before making any decisions. Now as part of this team, we encourage everyone with whom we meet to do what we did. Read. Research. Ask questions. How many free, fun, no-pressure financial events have you been to?
Is this financially sustainable for the life insurance company if everyone does this?
In our current financial climate, we are not accustomed to stable financial institutions since it is common practice in the market to risk money for greater returns. It’s important to realize that the life insurance industry is not a product of the market. Dividend-paying whole life insurance is not tied to the market at all. Furthermore, life insurance companies are regulated by the state, and must have 100% or more reserves on hand at all times. When a person is issued a policy, the company already has the ability to pay out the death claim. As an example, one of the companies we do business with has over 600% reserves. This speaks to their ability to pay out dividends yearly as well as their conservative choices for growing their capital over the past century.
Finally, policy owners don’t all die at the same time. Therefore, benefits are not being paid out all at once. Actuaries (the “engineers” of the life insurance industry) are very meticulous in their calculations to predict with great accuracy the approximate number of death claims they will have from year to year. These calculations even take into consideration catastrophic events.
Consider this – how much reserve does your current banking institution have available? If it’s a U.S. bank, it is likely around 10%, the amount required by law. Think about that. Is your money at risk?
Can IBC be used to fund my child’s college education?
We love sharing with our clients that the cash value of your dividend-paying whole life insurance policy is not considered in applying for financial aid for the majority of colleges. Alternately, investments DO have to be reported. This enables IBC families to qualify for more financial aid.
With an IBC strategy in place, the child can utilize the IBC Strategy for financing education, or wait until after graduation to quickly pay off the student loans using the available cash (policy loan). The educated and now-working (former) student can make policy loan repayments.
There are other options that families use in addition to this basic approach. Is this an area where you would like to see what might be possible?
What are some of the caveats of using IBC?
Since this is a life insurance contract, IBC can only be started with a person in which you have an insurable interest. This can be you, your spouse, your child, or your business partner. At the time of the creation of the contract, that person must be insurable. Medical conditions and age can change the insurability or effectiveness of the contract.
Insurability is only necessary when the contract is created, and it does not guarantee insurability for the future if you want to grow your system. For health reasons, you may not be insurable the next time, even if you already have a policy in place. If this is a concern, we have strategies for preparing for this.
If you are denied insurability for health reasons, and those reasons are addressed, it is possible to be tested again and qualify. The typical waiting period between testing is 1 year.
Those who practice IBC must master delayed gratification. For some, access to cash is irresistible and they find it hard to resist spending. IBC is a strategy that creates savings for emergencies, opportunities, and purposeful expenditures. IBC is not a get-rich plan that allows you to spend with no pay-back plan. If you couldn’t borrow it from a bank and pay it back, then you should not be borrowing against your policy.
Because of this, IBC is not for everyone. If you struggle with discipline in making payments to current creditors, then it is likely you may not pay yourself back either. IBC is a financing strategy, which requires money to flow. What might be possible if you controlled the direction your money is flowing?