Infinite Banking Concept

[cardinal93]

My WL policy breaks even at year 5 (cash value = premiums paid).

My PUAs are more than 2x my base premium though. I am also super preferred health rating but not sure if that makes any difference.

 

[DHK]

I always illustrate at standard, until there's a sufficient reason to make it preferred or better. Yes, the costs of insurance are much less on preferred ratings, so it helps the acceleration and efficiency of the overall plan.

 

[BYSFG]

Nearly any WL will work, as long as it has a decent dividend scale and you maximize any paid up additions riders. (I wouldn't use ANICO's WL for example, but Assurity life's WL would work and they make it easy to choose "max cv calculation" in their software.) Different companies will call the rider different things, but you want to maximize your use for it.

Your comp will go down compared to a base-only policy, but you'll build far more trust and be entitled to referrals. Your reviews with your clients will be easier too, plus encourage term conversions.

Currently in the process of being reappointed with Assurity. When I was with them I didnt get a chance to look through their products other than their critical illness product. Same with MTL -limited exposure for me.

With my current illustration programs Im facing that exact problem, program/illustration flexibility. If I do manage to set it up, it still falls per your test and takes way too long to break even. Each product to its own, just another sign to diversify carriers.

Comp wont be an issue, no stranger to the low comp after going around the block with IULs.

Thanks for the input much appreciated.

 

[DHK]

Just to practice, you can download the Assurity illustration software here:

Rosenthal Financial Services, LLC.

Just scroll down to the bottom and use the password shown. Then you can mess around with the Maximum CV calculation and see how well it stacks up.

But yes, illustration software does make a difference.

 

[YourFamilyBank]

IBC or BOYB seems to be more targeted to the higher end market? Especially those that have discretionary funds.

Doesn't sound as plausible for someone in the middle market who can only contribute <$2400 annually. I would assume that the target is to achieve an early break point and have a decent amount to access maybe with 10 years?

Not necessarily. I/we used to be all in the high market, but shifted our focus to middle market through our concept. Our average case size on a family/personal case is almost $13k annually. Typically on the same dollars they are already spending. That's the difference, same dollars.

Break points will vary on age, need for cash early on, etc... There is a happy medium, if need cash and a lot of it early on it can hinder higher growth later on in the policy. If don't need major cash early (2-3 years) then structure of the design will be different based on the need.

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I would work with them to find the money and prioritize their spending & savings, but yes, it can. To me, the litmus test is having 75%+ of your premiums paid available as cash values by year 5.

Also, I'd get them the most possible term insurance - either as a rider or a separate policy to help with conversions over time.

http://www.insuranceproshop.com/InfiniteBanking/

Agreed, we do a full analysis to find money being spent inefficiently and determine a goal.

But most of the time, we design with 75% cash values to premium paid in year 1.

Yes, agree again on term like you do. Get the most in term rider to allow more cash up until the rider is more expensive than an outside convertible separate policy.

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Any carriers you would recommend looking into other than those already brought up or those listed by Scangt earlier in the thread?

I no longer have access to some on those list such as MTL etc. Did run across a short list on Insurance Blog via BNTRS but I figured it couldnt hurt to ask, or try anyways.

Strictly with WL per your test, Im falling short. Carriers I do have, Im breaking even around the 15 - 20 year mark. Doesnt suprise my as I doubt many are for IBC/BOYB. Its a different story with UL but thats a whole different ball park itself, one I am hesitant in walking in to.

MTL is one we use - and it's all in the ability to alter/design/modify a standard policy to the client needs.

We go for 75% of cash in year 1 - example, $10k annual premium, $7,500 first year available. On business cases, we go higher if we can, to 80%.

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I go a different track mostly for this concept. I personally like the idea of not having to ask permission to get money. Owning a small business it is a pain in the butt ( at least it is for me) to play 20 questions with somebody in a cubical on "why" I need the money?

Heck if I want it for hookers and coke, I don't want to ask permission from somebody else.

But maybe that's advantage that only I see. I like being able to wire myself money in 24 hours without ever having to tell somebody why or gain their blessing.

Sometimes it isn't about the cost of the loan it's about the ease of the loan.

Very good point! Accessibility means a lot. And quickly. We have done this many times with business owners, getting them a loan processed and in their account within 24 hours for a need.

No asking, no begging, no documentation, no explaining.

But to them sometimes, the bigger advantage is no structured loan payments.

 

[BYSFG]

@YourFamilyBank, Regarding IBC/BOYB etc. Ive dabbled in the concept as you've all probably guessed, havent had the chance to go full swing so I never paid much attention to it, til this thread and a few questions asked by potential clients a couple days ago.

Currently looking at Metlife and Assurity (per DHKs suggestions) for future possible IBC cases. Havent had a chance to play with illustrations yet so Im just shooting in the dark with theory henceforth.

For those that seems well versed in IBC, how much fluff, or hype is there between non-direct and direct?

Between someone who uses it primarily as a loan source, Id imagine theyd opt for non direct but for a comparison between direct and non direct where the person is borrowing against it once in a while, does it matter? Kind of a "journey vs destination" scenario.

 

[DHK]

Assurity is a direct-recognition company in respect to dividends. So, by just that description, it can appear that it isn't appropriate for IBC.

However, I slightly change my definition or description of IBC. For me, IBC is having uninterrupted compound interest while you can use your money. As long as you pay the annual interest due, you will see that not only did it restore your earnings, but you still had a slight gain. You get to keep the principal and interest you would've paid to another lending institution. I emphasize borrowing AND repaying it back.

So that's how I would describe it for direct recognition policies. It's also more responsible to ensure that they understand they need to pay at least the minimum loan interest due every year, or the policy will begin to decline in value.

It can seem that with non-direct recognition policies that you can just take a loan "and forget it". Well, the loan interest may be offset by dividends... but that's just not as good of a situation to have, especially long-term.

So check it out. Do your own comparisons. In reality, it probably doesn't make that much of a difference, but you may need to adjust how you describe the concept to be accurate with the policies you are selling.

 

[JurgitaMak]

Nelson Nash did a lot of good work communicating the total value of permanent life insurance with this concept. Others have come along and refined the message since then.

My biggest issue with IBC is the piece that would have you almost depositing your entire paycheck into the life contract and almost constantly getting the money back out for everyday expenses through loans and withdrawals.

Many if not most IBC practitioners leave that part out. It's unnecessary and over the top. Approaches like "Private Reserve Strategy" are a better and cleaner way to show how to use permanent life insurance to its full potential.

Depositing entire paycheck is not the only issue

 

[SusieQ2]

Shouldn't a policy be allowed to grow during the first years? If you're taking a loan out in the first/second year doesn't that stress the policy and dramatically change the tax-free income when they are ready to retire?

Also, there have been studies done that show that NONE of these WL policies have performed as illustrated over a 20 year period?

The concept sounds good but even in Nelson Nash's book he illustrates at a high number. I don't have his book in front of me but I believe he illustrates at 7% and I'm not aware of any WL that has performed like that over a 20 year plus time frame.

Just curious does Your Family Bank illustrate with level or increasing DB?

 

[YourFamilyBank]

Assurity is a direct-recognition company in respect to dividends. So, by just that description, it can appear that it isn't appropriate for IBC.

However, I slightly change my definition or description of IBC. For me, IBC is having uninterrupted compound interest while you can use your money. As long as you pay the annual interest due, you will see that not only did it restore your earnings, but you still had a slight gain. You get to keep the principal and interest you would've paid to another lending institution. I emphasize borrowing AND repaying it back.

So that's how I would describe it for direct recognition policies. It's also more responsible to ensure that they understand they need to pay at least the minimum loan interest due every year, or the policy will begin to decline in value.

It can seem that with non-direct recognition policies that you can just take a loan "and forget it". Well, the loan interest may be offset by dividends... but that's just not as good of a situation to have, especially long-term.

So check it out. Do your own comparisons. In reality, it probably doesn't make that much of a difference, but you may need to adjust how you describe the concept to be accurate with the policies you are selling.

Very good description.

There can be a big difference, but with a company like Assurity or MTL there is negligible difference at best. The reason, is most direct recognition companies pay zero dividends on loaned amounts, while some (Assurity & MTL) that support IBC, use a dividend recognition factor to determine what dividend is paid on loaned amounts. For both, it's almost 100% - so there is just a slight difference.

For example, if had $100,000 loaned out and dividend was 1%, instead of getting $1,000, you might get $950.

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Shouldn't a policy be allowed to grow during the first years? If you're taking a loan out in the first/second year doesn't that stress the policy and dramatically change the tax-free income when they are ready to retire?

Also, there have been studies done that show that NONE of these WL policies have performed as illustrated over a 20 year period?

The concept sounds good but even in Nelson Nash's book he illustrates at a high number. I don't have his book in front of me but I believe he illustrates at 7% and I'm not aware of any WL that has performed like that over a 20 year plus time frame.

Just curious does Your Family Bank illustrate with level or increasing DB?

No it won't stress it in the first years. Now, as DHK pointed out, if you don't pay the interest back, the interest will accrue and decrease your collateral available, but the cash will grow the same. So as long as you eventually pay it, no effect.

As example, if I took a loan in year 1 and didn't pay back (or interest) and it accrued for 20 years and you didn't take one. Our cash value would be the same, but I wouldn't have the capacity you would because of the loan. Now, if I paid the loan and the interest due in year 20 (accrued and all) then I would have the same capacity as you.

Re: the illustrations - The guaranteed will be the same as illustrated. The dividend columns I'm sure are different, just like an IUL will be different or a mutual fund illustration. Now we use the non-guaranteed column because so low, won't be much lower ever, if it were 7 or more would probably use the mid-point.

But I will say this - I/we teach that you will make much more "outside" the policy with all you can do with it, than you will inside so any gain inside over the guaranteed is just "gravy" as we say in the south...

Death benefit is increasing to keep non-mec in place until the term rider falls off.