Infinite Banking Concept

[coachd]

MTL is a good solid smaller company. Not sure why their comdex is lower, but they have done pretty well in the past 5yrs (increasing year over year). They are very committed to the IBC concept, and helping their agents and clients understand the power of max funded whole life.

While they may not be the biggest or highest rated company, they have a decent product selection and offer agents alot when it comes to support and marketing. I wish some of the other companies offered half the support they do in regards to IBC. And for what it is....they have paid dividends for over 100yrs straight, so I guess they are doing some things right.
You could definitely do worse than MTL, and others are definitely stronger.

Nicely put. Do you write with other companies?

 

[pfg1]

Nicely put. Do you write with other companies?

Yes I do.

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[timcomp]

Not sure you read all the information on the Infinite Banking concept. People would use the Infinite Banking concept schedule loan repayments back into the insurance policy. These loans repayment include principal and interest. Therefore, the loan interest would not erode the policy values.

 

[coachd]

Not sure you read all the information on the Infinite Banking concept. People would use the Infinite Banking concept schedule loan repayments back into the insurance policy. These loans repayment include principal and interest. Therefore, the loan interest would not erode the policy values.

This depends on the company. Plus if never paid back until death people need t know what will happen. I love IBC, but not everyone out there tells people how it really works, and think every company out there works.

 

[THolder007]

So I have been studying IBC and Nelson advises to pay around 2% more in interest payments on a policy loan then what the Insurance company charges....why? what would be the advantage of this?

Thanks

 

[DHK]

Bank on Yourself®, Infinite Banking, et. al. Unraveled


Charging an extra 2% just makes the whole thing much more complicated to explain to agents and policyholders.

Let me make this simple when you're using a non-direct recognition policy (WL, IUL, or whatever):

Let's say you have $100,000 in CV earning 5%. In one year, that would be $5,000.

Let's say you want to take out a $50,000 loan against your CV, charging 5%. In one year, your policy charges would be $2,500.

If you don't pay any loan interest out of your pocket, your net policy gain would only be $2,500 ($5,000 - $2,500).

If you DO pay your loan interest back to your policy out of your pocket, you RESTORE your policy gain back to $5,000 ($5,000 - $2,500 loan cost + $2,500 loan interest payment).

The idea is having your money continue to grow and earn compounded interest without interruption.

If you complicate the idea by adding 2% "interest charges"... all you're going to do is confuse people... but the value is only that you're accelerating the loan payoff. Not a bad thing, but the true idea doesn't need over-complication.

 

[david_lewis]

So I have been studying IBC and Nelson advises to pay around 2% more in interest payments on a policy loan then what the Insurance company charges....why? what would be the advantage of this?

Thanks

You do that because you're supposed to be compensating yourself for the use of your money.

I think Nash refers to it as "opportunity cost."

You're really setting a rate over and above the insurer's interest rate that you think your time is worth while that loan is outstanding. You could use market rates or keep it simple and assign yourself a rate that is always at least prime + x.

If the insurer is charging you 5% for the loan and crediting 5% to the policy, it's a "wash." So, the effective rate of return on those CVs is basically 0%. Or, to say it another way, the net cost of the loan is 0%.

Paying "more interest" than the insurer charges is compensating yourself for the use of your money (instead of leaving it a "wash loan").

Banks do this to you all the time. You get charged, say, prime plus 1 or something. They don't make 0% net on their money.

If you do it with your own savings, you are adding to that savings.

My policy is with MassMutual, for example.

I took out a policy loan this year to pay for my wedding. Repayments are scheduled so that the loan is repaid and additional money over and above that is sent to the LISR or PUAR, as allowed, up to the maximum non-MEC limit.

The result is that it will increase the CV above the original illustrated rate.

Sure beats throwing it on a credit card or asking for a personal loan from my bank.

 

[pfg1]

In theory what nelson describes makes sense and is a good thing. In reality, with most companies if you send in x% more interest, it will just go to pay the loan down faster. And that is ok in my book. Bottom line, leveraging against your policy can be a good thing if done right.

 

[david_lewis]

In theory what nelson describes makes sense and is a good thing. In reality, with most companies if you send in x% more interest, it will just go to pay the loan down faster. And that is ok in my book. Bottom line, leveraging against your policy can be a good thing if done right.

Yeah, it sorta depends on what company you're with. The way I have mine set up with Mass, there is some leeway in the LISR and PUAR. I know with MTL, they encourage you to set aside money in a bank account and just purchase PUA on your anniversary.

If they wanted to make it easier, these insurers would pitch it like thus and so:

"When you take out a policy loan, we'll help you set up a repayment schedule that will repay the loan in full and add more death benefit and cash value to your policy."

The policyholder wins because policy values are higher. The insurer wins because they collect more premium.

Instead of doing this, they spend policyholder money on installing solar panels. *DOH*

 

[DHK]

"When you take out a policy loan, we'll help you set up a repayment schedule that will repay the loan in full and restore the original death benefit and cash values back to your policy."

The policyholder wins because policy values are restored to values listed in the illustration. The insurer wins because they collect more premium to use in their general investment account.

Fixed that for you.