Power of Whole Life Insurance Dividends

Becoming Your Own Banker, Part 6: The Power of Whole Life Insurance Dividends

In this episode, we dive deep into Nelson Nash’s book Becoming Your Own Banker, and the power of whole life insurance dividends. Many people are unaware of how they contribute to the growth of cash value and overall efficiency. We also explore the importance of thinking long-term when it comes to Infinite Banking and building a legacy through whole life insurance policies. By understanding the mechanics of whole life insurance dividends and focusing on long-term growth, we can create a powerful financial tool to pass on to future generations. 

This process may take time, but it is essential to build a solid financial foundation and leaving a lasting legacy. Join us as we uncover the secrets of the infinite banking concept and how it can help you take control of your finances and create lasting effects on your life.

The Benefits of Infinite Banking

People have a need for financing over their lifetime. Access to capital can help you partake in opportunities, grow your wealth, and also enjoy your wealth. Life insurance can also help you protect your family from unexpected death. Infinite Banking combines these two needs into an asset that is ultra-efficient and fulfills both. 

When you pay premiums, you are contributing to an ever-increasing (and never-decreasing) supply of money. This is money that you can use whenever you want to, for whatever you want to. So you can be confident that the money you pay each month or year is doing something meaningful, in more ways than one. You’re not throwing money into the void. 

The powerful thing about Infinite Banking is that you are in control of your capital. Many people believe that if they really need money, they can simply go to a bank. However, it can be incredibly difficult to secure financing from the bank, unless you can prove yourself or provide collateral. It’s not a reliable system, because the bank can easily deny you funds. By creating your own pool of capital, you can ensure that you always have money available to you when you need or want it. 

The Power of Whole Life Insurance Dividends

When you have whole life insurance, your policy is always growing. This growth is a combination of three things: your premiums, guaranteed interest, and non-guaranteed dividends. These dividends may be non-guaranteed, however, they’re more likely than not. When you work with a mutual company, you get to partake in all company profits via dividends. Since they can’t guarantee profit, they can’t guarantee dividends, however, most major mutual companies have been profitable for over a hundred years. 

Because you can count on these things, your policy becomes more efficient over time. The uninterrupted compounding growth, plus using your policy’s dividends to purchase more PUAs, make your policy better at growing each subsequent year. This is by design, and you can think of it as a reward for holding up your end of the insurance contract, which is to pay premiums and loans on time. 

[24:56] “Nelson is saying if you fulfill your end of the contract… then the company is going to be more profitable than they’re projecting on the illustration with the dividends.”

Over-Engineering Life Insurance Policies

In Becoming Your Own Banker, Nelson shares that life insurance policies are “over-engineered.” He compares this to the fuel light in your car. When that light comes on, telling you that you need to put gas in the tank, it creates an immediate need. However, cars are actually over-engineered to have some space in the tank even when the fuel light comes on. The light creates urgency, yet the reality is that you should have plenty of gas to get to a gas station, and then some.

Actuaries, who do all the extensive mortality calculations, use this concept when determining life insurance rates. They do extensive research about longevity and health and determine how much it would cost to provide insurance to a 30-year-old over a 50-year-old. Or, they might determine what it would cost to insure two people of the same age and health, except one smokes and the other doesn’t. 

This determines the premium you pay. The over-engineering comes in because the actuaries add a little room for error.

[17:35] “That over-engineering is additional profit to the company, and that additional profit is just in case something would happen.”

This additional profit works in your favor, because the company can invest this. Then, it contributes to the company’s profits. Those profits translate to your dividends. So this whole system works in favor of you and the company so that everyone benefits.  That is the power of whole life insurance dividends.

Are You Getting Overcharged?

Because of this over-engineering, people who don’t understand life insurance insist that dividends are simply a return of overcharged premiums. This is an oversimplification. This can be a part of it, because of the way the actuaries over-engineer costs. However, this is not all that dividends are. 

Dividends represent all the various ways that companies profit. This includes investments, interest from loans, and yes, overpayment on premiums. However, life insurance companies don’t allow anything to go to waste, and they put any overpayment to work to make more profits for policyholders. 

This over-engineering is good and allows insurance companies to be more profitable than they even predict. It’s not unusual for dividends to actually be more than projected. 

Is Life Insurance Safe? 

What we’ve noticed is that many people separate their need for finance from their need for protection. They’ve got “spending” money (or investing money), and they’ve got emergency money. Infinite Banking suggests that you can combine the two and become far more efficient that way. By solving your need for finance with an asset that is safe and certain, you also create protection. 

[38:25] “When we’re talking about life insurance, there are guarantees—there are literally guarantees. You have a guaranteed death benefit, a guaranteed amount the life insurance company will pay out to your heirs should you pass away. You have a guaranteed cash value amount, which is literally a floor—the minimum amount of equity that you are able to access in the policy at any given time. It is a place to store cash for that purpose because you can depend on that guaranteed cash value. There’s also guaranteed premium.”

This guaranteed premium is a HUGE benefit because it means you’re locked in for life. The minimum premium you pay now will be the minimum you pay forever. The life insurance company cannot change your premium on you, nor can they change your benefits. Everything is bound contractually. 

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.

Rachel Marshall

Rachel Marshall is a devoted wife and nurturing mother to three wonderful children. Rachel is a speaker, coach, and the author of Seven Generations Legacy™, passionate about helping enterprising families unlock their true potential and live into the multi-generational legacy they are destined for. After a near-death experience, she developed a deep understanding of the significance of recognizing and embracing one's unique legacy As Co-Founder and Chief Financial Educator of The Money Advantage, Rachel Marshall is renowned for her ability to make money simple, fun, and doable. She empowers her clients to build sustainable multi-generational wealth and create a legacy that extends far beyond mere financial success. Rachel's expertise lies in helping wealth creators remove the fear of money ruining their children, give instructions for stewarding family money, teach financial stewardship and create perpetual wealth through family banking, and save time coordinating family finances. Rachel co-hosts The Money Advantage podcast, a highly popular show that delves into business and personal finance, including how to effectively manage finances, protect wealth, and generate sustainable cash flow. Rachel's engaging teaching style and practical advice have made her a trusted source of financial wisdom for her listeners.
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