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In 1835, Judge Willard Phillips received the first life insurance charter issued in the United States. His observation that “a life worth living is worth insuring” resonates today. Among the earliest policyholders was Daniel Webster, who demonstrated foresight by paying additional premiums to ensure that upon his death, any US city with a population exceeding 50,000 would receive a portion of his death benefit to combat smallpox.
This historical foundation illustrates how life insurance has long served as protection for families and as a versatile financial tool with far-reaching benefits. Today, life insurance—particularly whole life insurance—has evolved into one of the most powerful yet misunderstood financial strategies available to individuals seeking to build sustainable wealth.
The transformation of life insurance into the financial product we know today can be attributed mainly to Elizur Wright, whose 1844 experience at London’s Royal Exchange forever changed the industry. Wright witnessed an elderly man’s life insurance policy being auctioned to the highest bidder simply because he could no longer afford the premiums. This disturbing scene revealed two problems: the elderly man’s heirs would lose their inheritance, and more alarmingly, the policyholder’s life was now at risk, as his death would financially benefit the new policy owner.
Wright recognized that when financial systems value profits over principles, human life becomes commoditized. Determined to prevent such practices in America, he dedicated his life to creating a more ethical insurance framework. Through painstaking mathematical calculations—over 250,000 by some accounts—Wright developed two revolutionary concepts: net valuations and non-forfeiture provisions.
Net valuations established conservative estimates for premium collection and reserve requirements, making sure that insurance companies could fulfill their promise to pay death benefits. Non-forfeiture provisions—known today as cash values or cash surrender values—guaranteed policy owners would receive monetary value if they could not continue premium payments or chose to surrender their policies.
Wright’s innovations became crucial during the American Civil War, when tens of thousands of lives were lost. Many credit his diligence for guaranteeing that bereaved families received their life insurance payouts during this tragic period.
Since Wright’s time, whole life insurance has emerged as a financial cornerstone for millions of Americans. It has provided billions of dollars in tax-free money to beneficiaries of those who died from natural causes, epidemics, disasters, wars, economic downturns, and even terrorist attacks.
Yet despite this track record, misinformation persists. Some financial voices claim “life insurance sucks” or suggest it becomes unnecessary once a mortgage is paid off or children leave home. These perspectives fail to recognize the multifaceted benefits of whole life insurance beyond the death benefit—benefits that stem directly from Wright’s non-forfeiture provisions.
During economic downturns, housing crises, natural disasters, pandemics, and other emergencies, countless Americans have leveraged their whole life insurance cash values to pay mortgages, purchase food, clothe their families, and cover unexpected healthcare expenses. This liquidity aspect often becomes a financial lifeline during challenging times.
Building on the foundation of whole life insurance, R. Nelson Nash introduced the Infinite Banking Concept (IBC) in the 1980s. Nash’s insight came during the high interest rate environment of the early 1980s, when he discovered he could access money from his whole life insurance policies at 5-8% interest while banks were charging up to 23%. This realization allowed him to transfer debt from banks to life insurance companies, repaying the money at his leisure at much better interest rates.
The Infinite Banking Concept has three core principles:
When examining the volume of interest on typical loans, the numbers are staggering. A $250,000 mortgage at 5% APR over 30 years means paying over 48% in interest ($233,139 of $483,139 total payments). If you refinance after just five years—as many people do—this volume of interest jumps to 75% because most interest is paid on the front end of amortized loans.
The Infinite Banking Concept allows individuals to recapture this interest by becoming their own banker. Instead of paying a financial institution, you pay yourself, building wealth within a policy that grows even as you access its value.
Similar to the Infinite Banking Concept, the Perpetual Wealth Code™ provides a systematic approach to building wealth through whole life insurance. This method helps individuals:
The Perpetual Wealth Code™ recognizes that working, mutual respect, education, and faith are fundamental to creating sustainable wealth. Mathematically, this could be expressed as:
(Work + Mutual Respect + Education) × Faith = Sustainable Wealth
One insight of this approach is that paying cash for everything isn’t always the best strategy. Consider the example of someone who saved $10,000 earning 4% interest to buy a vehicle. By withdrawing this money, they lose $831.43 in potential interest earnings over the next 24 months.
Had they instead borrowed $10,000 at 6% (paying $636.95 in interest over two years) while keeping their savings intact, they would come out $194.48 ahead. This example illustrates how proper management of cash flow and leveraging can lead to greater financial efficiency.
Whole life insurance, as utilized in the Infinite Banking Concept and the Perpetual Wealth Code™, is different from term life insurance. While term provides coverage for a specific period, whole life offers permanent protection with additional living benefits.
Some characteristics of a properly designed whole life policy include:
In a well-designed whole life policy, cash values typically reach 50-70% of the first year’s premium immediately. By years 8-15, guaranteed cash values generally exceed total premiums paid. This creates a financial asset that grows tax-deferred throughout your lifetime.
For example, a 35-year-old male might see just a 3.46% increase in cash value above the annual premium in year five of a policy. This grows to 38.61% by year 10 and 87.58% by year 20. Few investments offer such consistent, guaranteed returns.
When purchased through a mutual insurance company, participating whole life policies allow policyholders to share the company’s profits through dividends. While not guaranteed, many mutual insurance companies have paid dividends for over 100 years—an impressive track record compared to publicly traded companies.
These dividends can enhance policy performance, adding 2.37% to guaranteed cash values by year 10, 11.53% by year 20, and 20.23% by year 30.
One of the most powerful features of whole life insurance is the ability to access cash value through policy loans. Unlike traditional loans, policy loans don’t require credit checks, applications, or qualification processes. The cash value serves as collateral, and the insurance company provides the funds.
When you take a policy loan, your cash value continues to grow as if the loan had never been taken. The insurance company lends you money from its general fund, using your policy values as collateral. This allows for compounding growth while accessing liquidity—a feature unavailable with most other financial vehicles.
How does this work in practice? Consider these real-world scenarios:
Barbara and Lee had paid off their mortgage early and were living on Social Security and income from Barbara’s part-time business. When faced with a costly emergency, they approached their bank for a loan, using their paid-off house as collateral. Despite their home equity, they were denied because of insufficient income.
Barbara and Lee had begun implementing the Perpetual Wealth Code™, giving them access to cash through their whole life insurance policy. This allowed them to handle the emergency without risking their home or financial stability.
Fred and Mary, retirees for over six years, faced similar challenges when Mary needed special medical care and Fred required hearing aids. With no obvious source of funds, they turned to a whole life insurance policy Fred had purchased 50 years earlier.
The cash value in this policy enabled them to liquidate enough money to cover these unexpected necessities. Over the long term, they actually kept more money than these expenses would have cost had they paid cash, thanks to the policy’s growth features.
Andrew and Amber had to decide whether to invest $1,000 monthly for retirement or purchase a participating whole life insurance policy. They realized that after 30 years, they would have approximately $687,473 in tax-free cash value through the insurance policy, compared to less after taxes and fees with traditional investments.
From day one, their policy provided over $507,000 in death benefit protection, growing to over $1,394,000 by age 67. This combination of living benefits and protection creates financial security that traditional investment vehicles cannot match.
Statistics show that education and financial literacy influence life insurance ownership. Those with higher education and greater financial literacy tend to own more life insurance than those with less education and lower financial literacy scores.
According to the Chicago Federal Reserve’s Economic Perspectives, households with net worth exceeding 10 times their income own whole life insurance, while those with lower incomes tend to purchase term insurance.
This aligns with the observation that many wealthy individuals and corporations utilize whole life insurance as part of their financial strategy. From John Wannamaker (founder of the first department store) to Jerry Falwell (founder of Liberty University), James Cash Penney (J.C. Penney stores), and many corporate executives, whole life insurance provides liquidity, tax advantages, and financial security that other vehicles cannot match.
Despite its benefits, whole life insurance faces criticism. Many financial voices claim it’s “the worst possible investment” for your money. This mischaracterization stems from two misunderstandings:
Critics also overstate the commission earned by agents selling whole life policies. In reality, an agent selling a $1,000 monthly whole life policy might earn approximately $9,720 in commissions, while a money manager would earn upwards of $177,731 in management fees over thirty years on the same amount of money.
For maximum benefit, a whole life policy should be carefully designed with these characteristics:
Properly designed, such a policy becomes a financial cornerstone that provides protection, growth, and liquidity throughout your lifetime.
In today’s uncertain economic environment, whole life insurance offers stability that many other financial vehicles cannot. While the market fluctuates, inflation erodes purchasing power, and tax laws change, whole life insurance provides:
As financial expert Warren Buffett advises, “Never lose money.” Whole life insurance aligns with this principle by providing guarantees and reducing risk. By lowering risk, you become a better money manager and position yourself to take advantage of opportunities when they arise.
Judge Phillips’ observation that “a life worth living is worth insuring” remains as true today as it was in 1835. Whole life insurance, especially when utilized through strategies like the Infinite Banking Concept or the Perpetual Wealth Code™, provides more than death benefit protection. It offers a financial tool that builds sustainable wealth while protecting against life’s uncertainties.
The cash value of whole life insurance should not be compared to an investment where risk is assumed by the investor. Rather, it is the natural product of owning the insurance policy, similar to equity in a home resulting from mortgage payments. The main difference is that cash value in whole life insurance is guaranteed without assuming market risk.
Those who build cash values in whole life insurance first provide essential protection for their loved ones. When they leverage these cash values to make investments, purchase assets, or handle unexpected expenses, they benefit from:
At its core, whole life insurance recognizes that human life has immeasurable value. While no financial product can fully capture this worth, a properly designed whole life policy acknowledges that value while providing practical benefits throughout your lifetime.
In a world where most Americans lack savings to cover a $1,000 unexpected expense, whole life insurance offers a solution. It provides a place to keep money that continues to compound even while being leveraged for other purposes, allowing policyholders to handle emergencies or opportunities without assuming debt.
Those who understand this concept—and implement it through strategies like the Infinite Banking Concept or the Perpetual Wealth Code™—position themselves to build sustainable wealth for themselves and future generations. In doing so, they affirm the timeless wisdom that a life worth living is, indeed, a life worth insuring.
Tomas P. McFie DC PhD
Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.
This free binder has the information to build your own Infinite Banking system.
