Infinite Banking Concept

[scagnt83]

I have been recently talking with 2 different agents about the IBC. One is a Nelson Nash BYOB practitioner an one is with BOY. They both drew up 2 completely different mock policies for me and I am more confused than ever.

I am a saver, I pay my credit card bills off every month, I have no debt or outstanding loans. I am unmarried and don't have any kids. However, I wonder if this is a viable plan for me because at my current lifestyle and age I won't have a death benefit to leave to anyone. I do work in a field with a high turn-over and not much job security.

I am afraid of 401ks and Mutual funds because of the horror stories of people that have had their funds cut in half at the time they needed it to retire. To me, this is why IBC looked like a great alternative.

But if a person knows they need to DO SOMETHING to have some kind of funds to retire on, what do you do if the you don't even seem to qualify for IBC? How do I even know that the 2 agents aren't just trying to sign me up for something that can't even work for me?

Frustrated and confused,

Swenea

Experiences like this make me cringe a special type of cringe. I do not doubt that you are very confused and frustrated.

I cant comment on the agents intentions. But if they cannot communicate the product/concept in a way that you can understand then it is not the right situation for you.



IBC is a theory/concept based on using a Permanent Life Insurance Policy.
There are different IBC "theories" out there. Some better than others imo.

But to effectively implement and maintain any of the concepts (no matter how good or bad they may be).
You must understand the PRODUCT first.

Compare it to Mutual Funds.
There are hundreds if not thousands of investment "theories" "concepts" etc. that surround the use of Mutual Funds.
Some of those theories are better than others.

But most people do not start to invest in Mutual Funds using a complicated investment theory.
Most people start simple.


In my honest opinion (as someone who once sat through a 2 day Nelson Nash seminar for agents), most full fledged IBC concepts can get a bit extreme at times for the average person.


But what is not extreme is using a Permanent Life Insurance Policy as a simple savings vehicle.
Understand and experience the product before you involve your time/money/effort/future in a complicated theory/concept.




Theories/Concepts aside. PI (Permanent Insurance) whether it be Whole Life, Indexed Universal Life, or Universal Life; can be an excellent long term tax advantaged savings tool.


Your Cash Value will grow around 3%-4%, possibly up to 5% or more on an IUL (Indexed Universal Life).
It grows Tax-Deferred. And it can be accessed on a Tax-Free basis.

A tax deferred/tax free 4% is the same as around a 6% return depending on your tax bracket. And that is with no risk to your principle.


The product utilizes Loans, to create Tax-Free access to funds.

Some of the better products out there feature "wash loans" that create no negative load on the policy.

Some policies also offer "Non Direct Recognition" Loans.
This simply means that the value that is received in a Loan, still "stays inside" the policy and is credited with gains along with the rest of the CV.
This allows for the potential to arbitrage the Loan Interest, and actually earn money that you have received in Income.

Many of the better policies actually offer both of these options to choose from if you take a Loan.


Use an agent that understands the Product and that can effectively communicate it to you.
The Product is effective enough without involving complicated (and sometimes not practical/valid) theories or concepts.


Out of curiosity, what companies are these agents trying to sell you?

 

[LGilmore]

"But what is not extreme is using a Permanent Life Insurance Policy as a simple savings vehicle.
Understand and experience the product before you involve your time/money/effort/future in a complicated theory/concept."

Very much in agreement. The thing is pretty much if you start a whole life and decide to do all these bells whistles and clangs, the policy is there and established to work with.

One thing that bugs me about all this "stuff" thrown out to make whole life sound like something different is it doesn't need to be called anything or have any special marketing names made up because it is such a strong product in doing exactly what it is supposed to do.

Personally I sort of find that the more "concepts" that have to be sold, the less faith the agent has in the product.

I've owned whole life for more than 25 years and it has done everything I've asked it to do. I could go on, but the football game is about to start.

 

[Swenea]

The agent that was under the Nelson Nash theory/ BYOB mocked up a Ameritas policy and the BOY agent was suggesting a Lafayette policy. The Ameritas one was for $100,000 and the Lafayette one was suggested I start at only $30,000.

 

[scagnt83]

The agent that was under the Nelson Nash theory/ BYOB mocked up a Ameritas policy and the BOY agent was suggesting a Lafayette policy. The Ameritas one was for $100,000 and the Lafayette one was suggested I start at only $30,000.

How much per year are you looking to contribute?

Were both of these policies run at the same premium level?


Neither are companies I would sell.
No way on Ameritas. Lafayette has a decent WL, but there are a lot better options.

Mass Mutual, Penn Mutual, Ohio National have the top 3 WLs in my opinion. Penn is probably my favorite with Mass a very close second.


Also, it is VERY important to note that while IBC concepts might be a type of financial theory; they are Cash Flow/Spending concepts, they are not Retirement Income Theories.

And it sounds like you want something to help supplement retirement.

BYOB focuses on cash flow, specifically on recapturing spent interest and lost opportunity cost.


But both concepts have one thing in common, and that is they involve actively using the policies to finance purchases.
They do not look at the policy from a "retirement income" perspective (accumulation phase followed by distribution phase)

If you are looking to save for retirement you need to use the policy for what it does best. And that is to have an accumulation phase to grow your money tax deferred. And then have a distribution phase with a tax-free stream of income.

The best thing about what the policy does best, is that it takes no complicated concepts, no $30 books, and no wondering which "concept" is best.

All it takes is understanding the policy and how it works.



But since you mentioned that your profession has a high turn over rate, an IUL or a UL might be a better fit. This would give you more premium flexibility than a WL would. You could actually skip an entire year if things really hit the fan.

An UL/IUL also has the ability to have different internal mechanics, which allow for a higher % of income to be drawn, and allows for a higher portion of the yearly gains to go to the Cash Value instead of the Death Benefit.

How old are you?

 

[DWPCL]

How much per year are you looking to contribute?

Were both of these policies run at the same premium level?


Neither are companies I would sell.
No way on Ameritas. Lafayette has a decent WL, but there are a lot better options.

Whats wrong with Ameritas? Why do you feel that Ohio National has a superior product than Lafayette? Is it just because of how they illustrate?

By the way I write the majority of my life business with Penn, but I would have no issue writing for the companies listed above.

I'm not trying to be smart. I am genuinely interested in your response.

 

[NWBenefitProvider]

Interesting conversation here. I'm also curious about carrier choices. I'm a fan of Guardian's WL, but maybe because that is what I have for myself.

IL/IUL looks attractive to a lot of people for the flexibility, but it isn't as straight forward as WL.

You guys seem to know quite a bit about this, so I'm going to ask a question here if you don't mind...I see a fairly large number of people buy very small WL and permanent life policies, but I can't wrap my head around why? Why not get larger amount of term while you need the protection, rather than a very small benefit at a much higher cost? Genuine questions here, not trying to be a turkey.
Thanks.

 

[rayluk]

Do both. Buy large term and whatever WL your cash flow allows.

 

[scagnt83]

Whats wrong with Ameritas? Why do you feel that Ohio National has a superior product than Lafayette? Is it just because of how they illustrate?

By the way I write the majority of my life business with Penn, but I would have no issue writing for the companies listed above.

I'm not trying to be smart. I am genuinely interested in your response.

Ratings and dividend history.

Ameritas has an 83 Comdex.
Allianz has an 87 Comdex.

Penn Mutual has a 96 Comdex
Mass Mutual has a 99 Comdex

North American/Midland has a 92 Comdex.
LFG has an 89 Comdex.


89 is about as low as I will go with Permanent Insurance.
It is one thing to sell a low A rated Annuity. That contract is most likely for just the next 10 years.
But a PI policy is for the next 30/40/50/60 years depending on the clients age.
The longer the term the more important the Ratings are.


I also do not have the trust that Ameritas will have the ability to sustain high dividends like Penn and Mass can over the long term (or that they will even still be Ameritas in 30 years).


I will admit that I do not know what Ameritas' current dividend is. But that is because they are not on any of my Dividend charts. Which means it is unlikely they are as competitive as the top players. Either way, with an 83 Comdex no way.

 

[Jdubb]

Are dividends typically paid based upon the "Gross" Cash Value (Current Value + Loan amount) or upon the "Net" Cash Value (Cash value - Loan)?

 

[Larry Tew]

Are dividends typically paid based upon the "Gross" Cash Value (Current Value + Loan amount) or upon the "Net" Cash Value (Cash value - Loan)?

You're talking about "Direct Recognition" whereby the company "recognizes" policy loans and lowers the dividend accordingly versus "Non-direct Recognition" where the dividend is the same regardless of policy loans.

I prefer "non-direct", but there's more to the story, such as variable versus non-variable loan rate.

Plenty of good companies in each camp.