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When it comes to personal finance, few tools offer the flexibility, stability, and growth potential of participating whole life insurance. Unlike its more commonly discussed counterpart, term life insurance, participating whole life insurance provides death benefit protection and builds cash value that can be accessed during your lifetime. This unique attribute allows policyholders to leverage their own assets to finance major life purchases, investments, and even business ventures without disrupting the growth of their policy.
For individuals seeking financial stability and growth, participating whole life insurance represents a path less traveled but far more rewarding. This approach to personal finance empowers individuals to become their own bankers, creating a cycle of wealth building that traditional financial strategies miss.
Before delving into how participating whole life insurance can finance your life, it’s important to understand what makes this financial tool unique. Participating whole life insurance is a permanent life insurance policy that provides coverage for your entire life, as long as premiums are paid. Unlike term insurance that expires after a specific period, whole life insurance combines a death benefit with a savings component that accumulates cash value over time.
The “participating” aspect is vital. When you own a participating policy, you’re part-owner in the insurance company’s profits. The company shares its excess profits with policyholders through dividends, which can be used to purchase additional paid-up insurance, increasing your death benefit and cash value.
While many financial advisors focus on term insurance because of its lower initial premiums, they overlook the living benefits and financing possibilities that participating whole life insurance offers throughout your lifetime.
The cash value component of participating whole life insurance creates the foundation for its financing capabilities. This cash value grows through:
This cash value becomes an asset you can borrow against at any time and for any reason. When you take a policy loan, you’re not withdrawing money from your policy. Instead, the insurance company lends you money from its general fund, using your cash value as collateral. This distinction means your policy grows as if the loan had never been taken, allowing for uninterrupted compound growth.
Policy loans offer several advantages over traditional financing methods:
These advantages make policy loans the ideal financing tool for major purchases, investments, or emergency funds. The flexibility to control your financing terms puts you in the driver’s seat of your financial life.
To illustrate how participating whole life insurance can finance life’s major purchases, let’s consider the case of a young adult named Jeffrey.
Jeffrey had a clear vision from age 14: to own an auto mechanics shop. With his parents’ guidance, they established a participating whole life insurance policy when he was 16, contributing $20,000 annually ($10,000 from Jeffrey’s earnings at a local auto shop, matched by his parents). This early start was crucial, because life insurance costs increase with age.
By age 26, after 10 years of premium payments totaling $200,000, Jeffrey had built substantial cash value in his policy. He decided to stop premium payments and instead borrowed $15,000 from his policy to purchase a used pickup truck. Instead of financing through a bank or dealership, Jeffrey repaid his policy loan at $290 monthly, similar to what he would have paid elsewhere.
The difference? After five years of repayments, his policy had grown by $80,654 in cash value beyond what it had when he first took the loan. He had effectively “paid himself” rather than paying interest to a financial institution, all while maintaining the growth trajectory of his policy.
This example demonstrates how participating whole life insurance can create an ecosystem where major purchases contribute to wealth building rather than wealth depletion.
The financing power of participating whole life insurance goes beyond personal purchases like vehicles. It can be effective for real estate investments and business opportunities alike.
When Jeffrey turned 34, he had the opportunity to purchase the building where he worked as a mechanic. The owner wanted $200,000 for the property. Jeffrey took a policy loan of $223,360, buying the building and using the additional $23,360 to purchase new equipment for the shop. He then leased the building and equipment back to his employer.
This strategy allowed Jeffrey to:
With his increased income, Jeffrey was able to repay $2,220 monthly on his policy loan. Nine years later, when the loan was fully repaid, his policy had grown by $342,973 in cash value beyond what it had when he took the loan. All of the growth occurred while he was using the money elsewhere.
This exemplifies the “velocity of money” concept that makes participating whole life insurance powerful. Your money works in multiple places at once, creating compound returns that traditional financing can’t match.
Participating whole life insurance creates long-term value that extends into retirement and beyond.
In Jeffrey’s case, even if he never made another premium payment after age 25, his policy would grow to over $1.1 million in cash value by age 66. This money could be accessed tax-free during retirement, providing income without being subject to market fluctuations.
The death benefit would also grow to over $2 million. Even if Jeffrey withdrew the entire cash value during retirement, his beneficiaries would still receive more than $887,000 tax-free, as dividends increase the policy’s death benefit throughout his lifetime.
This dual benefit of retirement income and legacy creation sets participating whole life insurance apart from other financial tools. Traditional retirement accounts face tax implications upon withdrawal and can be depleted entirely during your lifetime, leaving nothing for heirs.
Financial advisors who understand the power of participating whole life insurance recommend a multi-policy strategy for maximum benefit. Jeffrey implemented this approach by starting a new policy at age 26, allocating his $20,000 annual budget between loan repayments ($3,480) and premiums on the new policy ($16,520).
By age 35, his first policy had $153,766 in cash value, while his second policy had accumulated $160,452, giving him a total accessible cash value of $314,218. This substantial sum allowed him to purchase real estate properties and expand his income streams without increasing his working hours.
This approach to policy acquisition provides several advantages:
By initiating a new policy approximately every decade, individuals can build substantial wealth that remains liquid, protected from market volatility, and accessible for investment opportunities throughout their lives.
The financing power of life insurance isn’t limited to individuals. Many corporations and real estate developers use similar strategies on a larger scale.
For instance, in 1983, The Equitable Life Assurance Society partnered with a prominent entrepreneur to develop a 61-story building in Manhattan. The insurance company provided construction financing (similar to Jeffrey’s building purchase), while the entrepreneur contributed leases and development expertise.
This arrangement benefited both parties, demonstrating how life insurance assets can be leveraged to create real estate developments and other business ventures.
The advantage in personal and corporate settings is the ability to access capital without rigid repayment schedules that can strain cash flow. This flexibility allows entrepreneurs and investors to direct resources toward growth rather than debt service, accelerating wealth creation.
When compared to traditional financing methods, policy loans offer distinct advantages:
These advantages make policy loans an attractive alternative to traditional financing, especially for individuals who value flexibility and control over their financial lives.
The best time to begin a participating whole life insurance policy is always now. Due to age-based premium calculations, younger policyholders receive more favorable terms and can build cash value with less outlay over time.
When considering a participating whole life policy, it’s important to work with an advisor who understands proper policy design. Not all whole life policies are created equal, and the structure of the policy impacts its performance as a financing tool.
Considerations include:
A well-designed policy maximizes early cash value growth while maintaining long-term efficiency, creating the ideal foundation for a lifetime of financing opportunities.
By establishing a properly structured participating whole life policy, you create a financial foundation that grows regardless of market conditions. This foundation becomes a resource for financing life’s opportunities, from personal purchases to business ventures and real estate investments.
The main insight is that money doesn’t have to flow in only one direction. Traditional financing extracts wealth through interest payments to others. Participating whole life insurance redirects that flow, allowing you to recapture the interest you would have paid elsewhere and convert it into an asset that benefits you and your family.
As demonstrated by Jeffrey’s journey, this approach can transform ordinary financial decisions into extraordinary wealth-building opportunities. The same purchases and investments that would typically deplete resources instead contribute to a growing pool of capital that provides benefits throughout your lifetime and beyond.
The Infinite Banking Concept (IBC) is the strategic use of participating whole life insurance policies as your own personal banking system. Rather than relying solely on traditional lenders, IBC empowers you to leverage the cash value in your life insurance to finance purchases, investments, and even business opportunities — all while your policy continues to grow.
We specialize in designing whole life policies that align perfectly with the Infinite Banking Concept, ensuring maximum cash value accumulation and flexibility. By becoming your own banker, you take control of your financial future, reducing dependence on banks and credit institutions that often charge high interest and impose strict repayment terms.
IBC is more than a strategy — it’s a mindset shift. It transforms your whole life insurance from a simple death benefit into a dynamic, self-sustaining financial resource. This approach can help you build wealth steadily and access funds anytime without disrupting your growth potential.
If you want to learn how to implement the Infinite Banking Concept with confidence, McFie Insurance offers a comprehensive free ebook and personalized strategy sessions. Our expertise ensures your policy is tailored to your unique financial goals and circumstances, helping you unlock the full power of this innovative approach.
For those seeking financial stability, growth potential, and the flexibility to seize opportunities as they arise, participating whole life insurance offers a proven path forward. While the growth rates and cash values will vary based on individual circumstances, the principles remain consistent: start early, design properly, utilize strategically, and watch as your financial possibilities expand beyond what traditional approaches could ever provide.
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.
