Infinite Banking Objections, Answered

Have you heard about Infinite Banking, but somehow feel left with a bad taste in your mouth and you’re not sure why? We are airing some of the biggest Infinite Banking objections most people have in regards to whole life insurance. https://www.youtube.com/watch?v=imRoHqAgunk So, whether you’ve heard that it’s trash value insurance, it’s more expensive than term, it takes years to grow your cash value, the returns are garbage, or that the insurance company keeps your cash value when you die … and these dangers you’ve heard about whole life insurance may have also sounded believable, we’ll talk about each.  Today, we’re walking through a specific listener question that outlines probably every one-liner objection you’ve ever heard about whole life insurance. So, if you want to understand the facts, find out the truth, and make educated decisions about life insurance and your finances … tune in now! Table of contentsWhy We’re Answering Infinite Banking ObjectionsClaim #1: IBC is a Gimmick Whole Life InsuranceClaim #2: Whole Life Insurance is Too ExpensiveOwning vs. RentingClaim #3: Whole Life Insurance is Built on Empty PromisesClaim #4: The First Few Premiums Are Agent CommissionsClaim #5: The ROI is GarbageClaim #6: The Cash Value Isn’t Included in the Death ClaimClaim #7: You Have to Borrow Against Your Own MoneyRecycling MoneyClaim #8: Just Because It’s an Established Product, Doesn’t Mean It’s a Good OneClaim #9: Only Those Who Don’t Sell Insurance Can Be TrustedClaim #10: Dividends Are a Return of OverpaymentClaim #11: Cash Value is a Scam“Paying Yourself Interest”Additional Resource:Book A Strategy Call Why We’re Answering Infinite Banking Objections Frequently on our podcast, we receive comments from people who have infinite banking objections. Either they don’t understand whole life insurance, or they have misconceptions of what it can and cannot do. Sometimes, these comments can be downright argumentative.  We get it, we do. There’s a lot of financial advice out there, and much of it is conflicting. We’re not in the business of convincing people who simply want to argue, however, we do hope that by answering some of these Infinite Banking objections, we can truly connect with people who are open-minded and want to understand.  Claim #1: IBC is a Gimmick  A common Infinite Banking objection is that it’s a tactic or gimmick to “sucker” people into buying whole life insurance. Typically, people who make this objection believe whole life insurance to be a scam. This, however, stems from a fundamental misunderstanding of life insurance, and why people can and do want life insurance. This idea also highlights a particular misunderstanding about what IBC can and cannot do.  We address many of these claims in our blog post, “Is Infinite Banking a Scam?” However, we wanted to touch on the idea here, too. IBC is not just a gimmick, it’s a concept that can be applied to how you use whole life insurance. Infinite banking, essentially, is a concept that guides the design of a whole life insurance policy, as well as the usage of leverage.  It is not a get-rich-quick scheme, a magic solution, or an infinite pool of money. It is a school of thought that one can apply to your money. Some of the primary principles of IBC are liquidity, leverage, and uninterrupted compounding interest. Whole life insurance happens to be an ideal asset for applying these principles and more.  [11:35] “Gimmicks don’t last.”  IBC, however, has lasted. Whole Life Insurance On its own, whole life insurance is an incredibly valuable asset. It’s permanent insurance that helps families create a legacy and leave an inheritance, while also protecting income and assets. Having a death benefit, for many people, is priceless. It provides for your loved ones when you're gone, by not only providing a financial cushion but actually giving families the freedom and time to grieve without worrying about finances immediately.  The best way to ensure that this death benefit occurs is by having permanent insurance in place. The living benefits of whole life insurance—the cash value component—are an added benefit that can help individuals and families do the most with their finances. The cash value is like a savings component because it gives policyholders access to a portion of the death benefit while alive. Using policy loans to access your cash value is where IBC comes in.  Claim #2: Whole Life Insurance is Too Expensive It’s also commonly reported that whole life insurance, compared to term insurance, is far more expensive. And although whole life insurance has higher premiums, we wouldn’t call it more expensive. Here’s why… Whole life insurance is permanent insurance. That means that so long as you pay your premiums and keep the policy in force, a death benefit is guaranteed to pay out—either to your beneficiaries upon your death, or you upon endowment. Life insurance is a transaction, and because whole life insurance is essentially guaranteed, insurance companies must charge appropriate premiums. The premiums help pay for the cost of insurance. However, insurance companies also choose to give policyholders access to some of the death benefit as they pay premiums. This is your cash value.  Is Term Insurance Truly Cheaper? Term insurance, on the other hand, is so inexpensive because the likelihood that you will use it is extremely low. Insurance companies sell term insurance to people when they may feel like they need more protection, yet are also the least likely to die (and therefore use the insurance). They pay very few claims, so the cost simply isn’t as high.  You could pay thousands of dollars for term life insurance, and never have anything to show for it (aside from peace of mind, which is priceless). However, with whole life insurance, you get liquidity, certainty, and growth that is not correlated to the stock market. It’s not an investment and it’s not designed to be. It’s a place to warehouse your wealth so that you have certainty, which makes all of your other assets or investments all the better.  As a wealth creator, here’s what this really means: as soon as you switch your lens from a short-term to a long-term—dare I say lifetime focus—whole life insurance becomes the most robust and extravagant savings tool imaginable.   Owning vs. Renting Homeownership can be a good comparison to life insurance. Whole life insurance is like owning your home. It may be more expensive, but every time you make a payment, you build equity. Cash value functions much the same as equity (but better, because the bank doesn't control it).  On the other hand, term insurance is like renting. You’re paying each month for the basic function, but you’re not really working toward anything. Paying rent gets you no closer to owning the home, and you build no equity. Whole life insurance and term insurance are very different products. While they both provide a death benefit, the function is different, therefore the cost is different. It’s not apples to apples, and we shouldn’t treat them as such.  Claim #3: Whole Life Insurance is Built on Empty Promises We read a comment on YouTube that insisted that the client is “promised” everlasting insurance and a lucrative cash value that doesn’t actually deliver.  To this, we’d say yes! In fact, it’s not just promised, it’s guaranteed. Life insurance is a contract, so when you agree to pay premiums, the insurance company agrees to provide you with certain benefits, guaranteed. There’s nothing sneaky about it.  However, we’ll admit, there’s no promise or guarantee that your cash value will be lucrative. Again, this comes from a misunderstanding about whole life insurance and IBC. This isn’t an investment. Rather than promises of riches, life insurance companies guarantee you won’t lose money. In fact, they guarantee that the floor of your cash value will increase every year. You’re even guaranteed to earn a minimum interest rate.  This is not a scheme for riches, it is an alternative to storing money in the bank. This alternative offers more certainty than the FDIC provides for bank accounts, and a better interest rate than most banks (which hover around 1%). Not to mention, you have the opportunity to leverage your cash value for actual investments, while leaving your account to grow uninterrupted. However, life insurance alone will not make you rich.  Claim #4: The First Few Premiums Are Agent Commissions There’s a common misunderstanding that whole life insurance agents are slimy because they earn a commission on life insurance. This feeds into other misconceptions like cash value doesn’t build up in the first few years of owning a policy, because your money is directly lining your agent’s pockets. This simply isn’t true. As IBC practitioners, we are very involved in the design process of policies to help people have the most available cash value possible from year one. In fact, many of the policies we design make 60% to 85% of the cash value available in the first year.  It is true that part of the drag on the policies in the first year is the commissions that are paid out to licensed agents. However, the other people who are paid from first-year premium include the actuaries who design life insurance, underwriters who assess applications, all the service personnel, and other costs it takes for the insurance company to run a business.  [24:10] “It’s no different than the concrete guy that pours your driveway. They are getting paid to provide you [with] goods and services. And a majority of that is getting paid upfront.” This is no different, in fact, than term insurance. Even term insurance would be much cheaper if the insurance companies didn’t have to pay all of their home office personnel.