Life Insurance Blog

infinite banking with whole life
November 1st, 2009
in Life Insurance

How can you take advantage of the advantages of dividend paying whole life insurance?  Are you aware of the tremendous advantages that are available to you?

The bottom line is that most of the media and most of the people in the life insurance business have very little understanding or clue about how to use this product.  The whole concept is to uniquely fund and structure a dividend paying whole life insurance contract.   This concept was really developed by Nelson Nash and I highly recommend you read his book, “Becoming Your Own Banker”. 

Once you have funded the policy and creating a liquid fund that you can borrow from, you start to loan yourself money to finance your big ticket purchases.    Each whole life contract has a maximum amount of money that you can put in it before it loses its tax advantage.  When I say tax advantage, I am referring to the cash value growing tax deferred and the ability to axcess the money on a tax-free basis if done correctly.   Each contract has a MEC (Modified endowment contract) ceiling which is the maximum amount before the tax advantage goes away.  If you go over the MEC level than the internal buildup of the policy is taxed the same as an annuity.  This system allows you to recapture much of the interest that you would typically pay out to a finance company and make their bank grow.    This way you can buy a new car and finance it yourself.  For example, pull out 40,000 to buy that new car and then pay yourself back at an interest rate above the insurance companies interest rate.  When you amortize these payments, like a bank would, you pay yourself back over a period of time.   Let’s just say you loan yourself 40,ooo and amortize the loan over 4 years.   The insurance company charges about 6 percent for the loan and you pay yourself back at 10 percent.  The spread that goes back into your policy is similar to the spread that the bank would typically make.   At the end of the 4 year period you own the vehicle outright, your bank has been paid back the full 40,000, and it will have grown with the 4 percent spread it has been making from each payment.

This concept tends to be a major paradigm shift for people, but it works if done properly.  The key is that you set it up properly and try and raise the MEC ceiling as high as possible and then capitalize it so you have ample funds available  to use.  On top of being able to use these funds for loans to your self, it will create a great tax free retirement fund.  The living benefits of this system is tremendous and it will also give you a great permanent life insurance benefit that will grow large over time.

  1. That was a great article about whole life insurance. I didn’t understand that a MEC existed within a life insurance contract. This is very interesting stuff. Can you write more about the use of whole life insurance for retirement? Thanks

    Comment by Jackson Smith — November 3, 2009, at  6:27 am

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