It’s A Process, Not a Product

Several years back, when giving a presentation for Nelson Nash’s Think Tank in Birmingham Alabama, I shared with the advisers and agents gathered there, that the Infinite Banking Concept wasn’t as much about the product, participating whole life insurance, as it was about the process.

You see, even at that time, many advisers and agents were of the opinion that it was the product that made the Infinite Banking Concept so unique and beneficial.  And even then, they were telling policy owners to “run money through a policy to make it grow.”  Yet, through the process of developing the first e-app (The IBC Game) for the Infinite Banking Concept, we proved beyond a shadow of a doubt that it doesn’t make any difference how much money you run through a policy, it is the process that you follow to keep more of that money which provides you with the greatest rewards.

In the Infinite Banking Concept game app, we used a traditional savings account, a 401k, a person’s cash, and a participating whole life insurance policy as the source of capital to finance a purchase.  The results were, that regardless of the products used, the process of being able to keep interest that was otherwise lost or spent, created the greatest value for those who were in the position that allowed them to leverage another person’s money while their own money was permitted to continue to earn a rate of return. This is a proven concept which Warren Buffet’s father advised him about when he was only 7 years old and one that is worth understanding.

  • Anytime you can keep your money working for you and have the use of other capital to finance your opportunities or necessities in life, it is worth your time to do the math and find out if you can earn or save more by accessing other capital versus using your own capital and losing the growth it is currently earning.

And here in lies the problem about using other types of life insurance products besides participating whole life insurance when you take a policy loan.  In participating whole life insurance, you actually leverage your equity in the policy when you take a loan against it. This keeps your equity in the policy where it continues to earn a guaranteed ROR and any dividends that the company might share with you while the policy loan is outstanding.  With other life insurance products, you have NO EQUITY to leverage because,

  • Term and Universal life insurance products create NO EQUITY, only accumulated cash values.[i]

Without equity, (equity being insurance that is completely paid for, also known as paid-up insurance), the policy owner is forced to borrow their own money from their policy when they take a policy loan. The insurance company can charge a fee for this. They also set the interest rate on the loan. The insurance company may even take a portion of this interest, similar to a money manager’s fee, for their role in managing the policy loan.  Doing things this way, interrupts the basic principle that Warren Buffet’s father taught him at age 7,

  • “Always leverage another’s money when possible.”

The process of using participating whole life insurance is unique in that that policy owner can continue to experience the guaranteed growth and dividend participation, while using the insurance company’s capital to fund other investments, expenses or asset purchases.  Only when the interest for the policy loan is lower than what you will save, earn or acquire by taking the policy loan, should you consider exercising the option to leverage your policy to use the insurance company’s money.  “Running money through a policy” doesn’t make the policy’s cash value grow, in fact running too much money through a policy can actually decrease the overall rate of return you can earn on your money which didn’t necessarily need to pass through the policy in the first place.  It can also create a tax liability for the policy, otherwise known as a modified endowment contract.

Understanding the difference between the kinds of life insurance policies available is important.  Knowing that the equity, or paid-up insurance in participating whole life insurance, is what makes participating whole life insurance the ideal policy for being able to actually use someone else’s capital while still benefiting from your own capital growth is germane if you want to avoid taxes, lost earnings, and products that shift the risk onto you instead of onto the insurance company’s back.

Remember, life is a process, not a product. And “growth is the process of being liberated from the rules of men”[ii] or the use of capital.  So why would you use a life insurance product designed by insurance company’s attorneys to protect their bottom line when participating whole life insurance is the results of consumer’s demands on the life insurance companies?

Consumers understood a long time ago, (150 years or more) that without equity accumulating in their life insurance policy they were at risk of not having the coverage they needed in the future.  With equity, came the right of ownership.  And with the right of ownership came the privilege to leverage that ownership for the use of somebody else’s money.

Understanding the process is more vital to building wealth than owning a product.  Discover more about this process by listening in on the Perpetual Wealth Code™ at:

[i] Term life insurance, unless it is a recaptured premium term insurance policy doesn’t even build accumulated cash values.

[ii] Ayn Rand