Is Infinite Banking Sustainable

Is Infinite Banking Sustainable transcript

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.