Tell Me the Truth About "bank On Yourself" Whole Life Policies
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Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policie
Yes that is basically the question, I have been reading Bank On Yourself by Yellen, she indicates you write a WL policy with a PAUR (paid up additions rider) and the repaid loans add to the cash value and the total policy value???
Yes that is basically the question, I have been reading Bank On Yourself by Yellen, she indicates you write a WL policy with a PAUR (paid up additions rider) and the repaid loans add to the cash value and the total policy value???
- 11,263
Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policie
Alright, I've studied this at length. And I'm going to give you the truth.
Are you ready? THERE AIN'T NO SUCH THING AS A FREE LUNCH.
When you have sufficient capital in a life insurance product, you can borrow against it, using the cash values as collateral.
Who is issuing the loan? The life insurance company.
Do you think a lender is going to charge interest? YES! And they charge it UP FRONT out of the policy's cash values. Every year you don't pay off the loan, the outstanding balance will be charged loan interest.
So, the idea that you get to 'keep your interest and principle repayments' is kinda sketchy.
The idea that you get this money 'back to your policy' can only be substantiated (weakly) through the dividends credited back to your policy. Dividends are divisible surplus of profit of the life insurance company... therefore, the profit you helped the company earn, 'kinda' goes right back to you.
However, I think you would've earned the same dividend REGARDLESS of the amount owed or paid back to your policy (non-direct recognition policies).
So, I think it's nice to be able to get access to your policy's values, but I don't think it's everything these writers are claiming it to be.
The GOOD news: Is that if you take out that idea of "paying yourself principle & interest on your own loans", the idea has merit!
Most people spend first, and save what's left. With "infinite banking" and other similar concepts, you are SAVING first, and then spending.
Most people are barely earning 1% interest on their savings and spending about 15% on their credit cards.
With this concept, you could earn 4-6%/year using whole life policies (much more is possible with index UL), and spending about 5% on loans. You will have reversed the trend of paying more in interest than you earn on your money!
And THAT is where the true power of this concept is. Save more, continue to earn more on your savings... even with loans against it. Pay less than credit card interest rates and keep more of your money working harder for you.
Alright, I've studied this at length. And I'm going to give you the truth.
Are you ready? THERE AIN'T NO SUCH THING AS A FREE LUNCH.
When you have sufficient capital in a life insurance product, you can borrow against it, using the cash values as collateral.
Who is issuing the loan? The life insurance company.
Do you think a lender is going to charge interest? YES! And they charge it UP FRONT out of the policy's cash values. Every year you don't pay off the loan, the outstanding balance will be charged loan interest.
So, the idea that you get to 'keep your interest and principle repayments' is kinda sketchy.
The idea that you get this money 'back to your policy' can only be substantiated (weakly) through the dividends credited back to your policy. Dividends are divisible surplus of profit of the life insurance company... therefore, the profit you helped the company earn, 'kinda' goes right back to you.
However, I think you would've earned the same dividend REGARDLESS of the amount owed or paid back to your policy (non-direct recognition policies).
So, I think it's nice to be able to get access to your policy's values, but I don't think it's everything these writers are claiming it to be.
The GOOD news: Is that if you take out that idea of "paying yourself principle & interest on your own loans", the idea has merit!
Most people spend first, and save what's left. With "infinite banking" and other similar concepts, you are SAVING first, and then spending.
Most people are barely earning 1% interest on their savings and spending about 15% on their credit cards.
With this concept, you could earn 4-6%/year using whole life policies (much more is possible with index UL), and spending about 5% on loans. You will have reversed the trend of paying more in interest than you earn on your money!
And THAT is where the true power of this concept is. Save more, continue to earn more on your savings... even with loans against it. Pay less than credit card interest rates and keep more of your money working harder for you.
- 337
Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policie
I had a Medicare client that I took over as Agent of Record for his wife's life policy. As a teacher she was stressing out about money during the summertime. The policy she had was a WL one and ended up taking a $12k & $18k loan from it. Yes, she put the money into it but it also grew over the years! Just giving you a real life example.
I had a Medicare client that I took over as Agent of Record for his wife's life policy. As a teacher she was stressing out about money during the summertime. The policy she had was a WL one and ended up taking a $12k & $18k loan from it. Yes, she put the money into it but it also grew over the years! Just giving you a real life example.
- 1,271
Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policie
It works. It works so well that the congress had to create new cash value life insurance laws in order to hinder wealthy policyholders from putting too much premiums in too little time. It works so well the majority of whole lives ever written today are owned by the wealthy few. It works so well that many banks and larger companies put millions of dollars of premiums into policies that they own on their employees.
It works. It works so well that the congress had to create new cash value life insurance laws in order to hinder wealthy policyholders from putting too much premiums in too little time. It works so well the majority of whole lives ever written today are owned by the wealthy few. It works so well that many banks and larger companies put millions of dollars of premiums into policies that they own on their employees.
- 1,926
Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policie
Aren't most of the policies banks purchase, specially designed policies that have a large minimum premium and drastically reduced commissions?
Aren't most of the policies banks purchase, specially designed policies that have a large minimum premium and drastically reduced commissions?
- 1,271
Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policie
Whenever there's an open bid on large size policies, there'll be competition on the load. The same happens with large company owned policies as well. Even with small businesses, you can't show 0 CV at the end of first year. Regardless the concept works just the same.
Whenever there's an open bid on large size policies, there'll be competition on the load. The same happens with large company owned policies as well. Even with small businesses, you can't show 0 CV at the end of first year. Regardless the concept works just the same.
TaxFreeIncome
Expert
- 97
Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policies
Well put DHK, I especially agree with the indexed UL comment.
Well put DHK, I especially agree with the indexed UL comment.
cornerstonelega
New Member
- 9
Re: Tell Me the Truth About "bank Ou Yourself" Whole Life Policies
I looked at it too, and it seemed to me that for Joe Average making $40,000 a year it's not really a viable plan until his policy is paid up. For the guy on the street taking out these policies so their spouse will have something when they pass away, it's not a good idea either, as the funds your "borrowing against" are those funds you're putting away for your spouse. Borrowing reduces the amount they'll get, unless the funds are paid back.
If you've got the extra income, or extra funds laying around, there's nothing wrong with it. Gets rid of your interest payments .
I looked at it too, and it seemed to me that for Joe Average making $40,000 a year it's not really a viable plan until his policy is paid up. For the guy on the street taking out these policies so their spouse will have something when they pass away, it's not a good idea either, as the funds your "borrowing against" are those funds you're putting away for your spouse. Borrowing reduces the amount they'll get, unless the funds are paid back.
If you've got the extra income, or extra funds laying around, there's nothing wrong with it. Gets rid of your interest payments .
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