How to Buy the Best Infinite Banking Policy

Are you shopping for an Infinite Banking policy, but want to first make sure you have the correct policy design with the right life insurance company and a team you can trust? In this episode, we dive deep into the Infinite Banking concept and discuss the importance of choosing the right mutual insurance company and working with a like-minded advisor or agent team.

Join us as we share our insights and experiences to help you better understand and implement this powerful financial strategy in your own life. If you want to say goodbye to second-guessing and regret, and make Infinite Banking decisions with certainty and confidence, tune in today!

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Building Confidence Through Education

Finances can be a tough space to navigate because money is deeply personal, and everyone has different opinions. That’s why we value providing education–because we want to give people the tools they need to build confidence and make their own decisions about money. 

Confidence allows you to take action and build trust, and create a positive cycle. You learn more, become more confident, take more action, and build more trust. This simple, small shift allows you to be at the helm of your financial choices, rather than shifting responsibility off your plate completely.

How to Choose the Best Insurance Company

If you’re interested in Infinite Banking, based on our material or something you’ve heard elsewhere, you may have questions on how to do it “right.” While this can vary depending on your personal money goals, there are some general rules of thumb to follow when you buy a life insurance policy for IBC purposes. Let’s go over them together. 

1. Choose a Mutual Company

A mutual company means that the insurance company is owned by the policyholders. In order to benefit from dividends, this is the type of company you want to work with. As a partial owner, you get to participate in all profits. While not guaranteed, mutual companies tend to run a tight ship and make very conservative long-term decisions. You can expect them to profit. 

The other option is to choose a stock company, which is beholden to shareholders. These shareholders may not even have a policy with the insurance company. This can drive stock companies to make riskier, short-term decisions that aren’t always in the best interest of policyholders. You also don’t get those dividends if they do turn out okay. 

2. Look at Financial Ratings

In addition to being a mutual company, you also want to work with a company that has a solid financial history. A good track record suggests that they know how to manage risks long-term, and can continue to do so for 30+ more years. 

You can check a company’s financial rating in any of the major rating services: Standard & Poor, AM Best, Fitch, and Moody’s. A company with at least a 90% rating is a good company to work with. 

3. Do They Have a History of Dividends?

Another benchmark of a good mutual insurance company to work with is its history of paying dividends. This indicates that they have good long-term vision, and are capable of turning a profit even in dire economic landscapes. Many mutual companies have paid dividends every year for the last hundred years, which means they turned a profit during major wars, recessions, depressions, and the housing crisis. 

This is a great indication of good stewardship and consideration for policyholders. So be sure to choose a company that has a solid record of profit. 

In the same vein, it’s worth taking note of how close companies are to hitting their declared dividend. Occasionally companies overstate what they think the dividend will be, and end up being off the mark. It’s not necessarily a deal-breaker, yet something to be aware of as you look for companies. 

4. Customer Service

What kind of customer service does the insurance company provide? How responsive are the insurance companies? This is information your producer or agent will know well. Each company operates differently and their own way of doing things. Some may even be faster at distributing funds than others. If you’re going to be using your policy over your whole lifetime, choosing a company with good service will benefit you. 

It’s also important to note that while you can execute an IBC strategy with any mutual company, not every insurance company supports the idea or understands it. Your producer can also help you identify which companies understand what you’re trying to do. 

How to Choose the Best Producer/Team

After you have an idea of what company or companies you’d like to work with, you’ll want to choose an agent or producer to help you set up your policy. In an ideal world, this is a lifelong relationship, so you want to choose someone you trust and get along with. 

If you’re wanting to do an Infinite Banking strategy, proceed with caution when you see companies using other terminology. You’ll see various spin-offs of IBC, which are little more than marketing tactics. However, not every one of these companies is going to be advocating for or following the 5 Tenets of IBC. Let’s go over what those tenets are.

The Five Tenets of IBC

[15:20] “Number one, Nelson always said [to] think long-term. And when you link long term, you’re going to make better decisions for you and your family, instead of trying to make short term decisions.”

Number two, don’t be afraid to capitalize. Each and every person has a need for capital, so you should be looking for ways to solve that need. And when you have an opportunity, don’t be afraid to use your capital. 

The third tenet is to be a good steward of your policy. If you take a loan, pay it back in full. While you can get away without doing so, you’re only hurting your own bottom line. 

Tenet four is to not do business with banks. Now, this can take some considerable time, because of our current economy. But eventually, you should have a banking system that allows you to finance your own endeavors. 

Finally, you’ve got to re-think your thinking. Don’t accept everything you know as fact, and be willing to learn and grow. In particular, this applies to what you know about whole life insurance, as many people misunderstand it. 

How Does Your Advisor Support You? 

When choosing an advisor, if you’re wanting to do Infinite Banking, the best thing you can do is find someone who has gone through the Nelson Nash training using the Practitioner Finder. These are going to be advisors who are well-versed in IBC and have the desire to keep growing in their practice and their offerings. 

In addition to the support you’ll get from an IBC-trained advisor, it’s also important to ask them about their practices. Will the advisor do annual reviews? Can you count on them, or their team, to help you maintain or manage the policy when needed? Will your advisor give you a second opinion? Do they have a sufficient relationship with the insurance company to handle any problems? And finally, does your advisor have a sufficient team to ensure that all bases are covered and you will be taken care of? 

How to Buy the Best Infinite Banking Policy

The final step is determining the right policy and policy type. While this is mostly going to depend on what you want to do with your money, and what assets you already have, we can make some general suggestions. 

1. Choose Whole Life Insurance

In addition to working with a dividend-paying mutual company, you also need the right product from that company: whole life insurance. Whole life insurance is a type of permanent cash value insurance. The cash value is where you’re going to be building and using capital. 

Term insurance, on the other hand, is temporary insurance that does not have any cash value. You can, however, buy a convertible policy that you eventually turn into whole life insurance, if you’d like to lock in your insurability now, and can’t commit to whole life yet. 

There’s also something called universal life insurance, which has a cash value component. This, however, does not have the same strength of guarantees that whole life insurance does and is not reliable for capital growth. It’s correlated to the stock market, and therefore subject to the same fluctuations. 

You want guaranteed interest, guaranteed level premiums, and a cash value that’s guaranteed not to decrease. You get all of that with whole life insurance. And while the dividend is not guaranteed, that’s simply because profit cannot be guaranteed. That’s why you want to work with a company that has a good history. 

2. Paid-Up Additions

If you want a policy with the most early-cash-value build-up, you’ll want to maximize your PUAs (paid-up additions). PUAs are additional money that you can contribute to your policy every time you pay your premiums. They are like additional, fully paid-up death benefit. This translates to additional cash value since the cash value is the equity of your death benefit. 

However, just because maximum PUAs are great for early cash value does not mean it’s automatically the right choice. You also want to have enough base premium to support a solid death benefit. You’ll want to think about and balance your family’s need for cash with your family’s need for protection.

[49:29] “I can tell you right now, the skinnier the base policy, the greater the chance of it to lapse. Why? The skinnier the base, the [fewer] guarantees you have.”

The reason for this is because PUAs don’t accumulate interest and dividends in the same way or at the same rate as base premium. So while PUAs will increase your cash value in the early years, don’t rely solely on early PUAs. It’s okay for your policy to take some time to build up in order to get the most guaranteed benefit. 

3. Apply Dividends to Cash Value

When you do earn dividends on your whole life insurance policy, you have several ways to take them. For example, you can apply dividends to your premium or to any outstanding loans. You can also just take your dividends as cash. Our favorite option, for IBC purposes, is to apply the dividend to your cash value. This is how you grow your policy and really get some momentum on your capital-building journey. 

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help!  Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.