Have you ever heard of “Infinite Banking”? It is a great strategy that is pioneered by Nelson Nash that uses the cash value of life insurance as your personal bank. In essence you buy big ticket items with the cash inside the dividend paying whole life insurance policy and finance the purchase with it. For example, you buy a new car with the buildup in your policy and then amortize the loan over a period of time and pay your policy back at a fair interest rate above the interest rate of the insurance company. Rather than make the bank or finance company rich, you are able to recapture a lot of the finance charges you would otherwise payout elsewhere. After paying back the loan to yourself, you have completely repaid the principal and made the interest spread yourself. This will turbocharge your policy.
Not only is the cash value used during your life for various purchases, investments, etc., but it can be used for retirement income as the money can be accessed at retirement tax-free. In order to create the “infinite Banking” concept you need to capitalize the bank. Just like Bank of America or the community bank, there was no money in the bank until it was capitalized. Once it is capitalized, the fund has been created to use for this purpose. It is important to set the policy up correctly with a good mutual company and to fund it the appropriate way. The structure of the policy is important for your long term success.