Does Infinite Banking make sense to you?
Introduction
Infinite banking, although it has been around for at least a century, didn’t become a famous concept until 2000. The enhancement of this idea is in thanks to the book “Becoming Your Own Banker” by Nelson Nash.
Understanding what infinite banking means can be a formidable task, but worthwhile to the right person. It may not be for everyone, but learning the basic values of infinite banking should be on your investment list of things to know.
So let’s understand what infinite banking is, splitting down the basic concepts and if going down this path is appropriate for you.
Infinite Banking Basics that you need to comprehend
The proposition behind infinite banking is for you to be your own banking system through “dividend-paying, permanent life insurance.” Instead of an institution or an individual having control over your finances, you take back control of all the banking functions you do on daily basis. Infinite banking is a procedure that allows people to both borrow money and save money.
But before continuing, you must comprehend what permanent or whole life insurance is. This type of policy is lifetime coverage, as long as you continue to pay the monthly premiums. Because of that, your premiums are more exorbitant than term life insurance since the insurers are at an extreme risk of having to pay out the death benefit.
Whole Life Insurance Company:
A whole life insurance policy that has a dividend-paying segment adds cash value to the policy, almost like a savings account. These dividends are deposited to the policyholder by the insurance company. It is very nearly like you are investing in the insurance company. Normally, the amount of dividends paid helps counterbalance the higher monthly premium payments. You must be competent for this type of policy to use the infinite banking concept.
Realize the whole life insurance is also very exorbitant– especially compared to term life insurance policies. One of the substantial drawbacks of this policy is that insurance salesmen can mislead the pros and cons, simply to get a commission on the insurance.
How Infinite Banking Work?
Once you comprehend what is involved in infinite banking, you can begin to learn how it all works. Your personal bank arrives from the cash value of the insurance plan. Insurance companies guarantee a minimum return rate on the cash value that is normally between 3 and 5 percent. On top notch, each year your policy gains an annual dividend based on the company’s performance. This is termed as an “overpayment of premium” that is exempt from taxes.
Where the banking comes into action is through borrowing against your policy. You can earn money from your cash value and use it for something else. The bonus is your cash value continues to get dividends. Ultimately you are imitating how a bank operates with borrowing a loan, just with your own money and insurance policy.
Is Infinite Banking Absolutely For You?
As mentioned before, infinite banking is not for every person. It needs a lot of discipline and dedication. It is something you must dive completely into, which may need sacrifices until you can see the rewards. But when done perfectly, the rewards are endless.
You also have to qualify for the insurance policy required to follow the infinite banking strategy. If you cannot purchase a dividend-paying whole life insurance policy, then infinite banking won’t work appropriately for you.
Conclusion:
But if you are committed and searching for a way to take control of your finances, then adopting infinite banking is best for you. It gives you the maximum of advantage if done under the proper mechanism.