by Rick Blaine » Fri Jul 14, 2006 09:38 pm
Does anyone here participate in a Equity Index Universal Life Policy with the idea of building up large Cash Value for borrowing? Usually they are heavily overfunded upfront just below MEC limits or Modified Endowment Contract. It is an interesting idea, you'll usually earn anywhere from 4-6% interest or if you pick a more traditional UL or WL one can anticipate 5% from a good Participating W/L carrier like Guardian Insurance.
Idea is stuff as much money as you can in the first 4-5 years. When you have substantial Cash Value all your borrowing is done outside of the Insurance Contract. Take out say $25,000 out to buy a new car. You pay yourself back with 8% interest, insurance carrier will charge 0-4% depending upon your contract. Yet the interest you pay yourself back with is money earned compared to sending it to a third party bank.
Idea is stuff as much money as you can in the first 4-5 years. When you have substantial Cash Value all your borrowing is done outside of the Insurance Contract. Take out say $25,000 out to buy a new car. You pay yourself back with 8% interest, insurance carrier will charge 0-4% depending upon your contract. Yet the interest you pay yourself back with is money earned compared to sending it to a third party bank.
Posted: Sat Jul 15, 2006 03:54 am Post Subject: Infinite Banking system....
So far I know the equity indexed Universal Life policy is similar to the conventional universal life insurance policy. It offers a death benefit as well as a cash value that grows over time. It has the advantage for the tax-deferred growth of the account value; it is linked to the growth lined to an equity-index. But how it is related to the infinite banking system?
Posted: Sat Jul 15, 2006 04:39 am Post Subject: advantages of the infinite banking
Could anyone explain the advantages of the infinite banking system? and how the equity maximization related to? thanks.
Posted: Sat Jul 15, 2006 10:03 am Post Subject:
Infinite Banking System,
Basically a policy usually a UL or a EIUL but some use a W/L Policy. The basic thing is to create a contract with the least amount of Death Benefit and the greatest amount of Cash Value as quickly as possible. With the UL you can do this in about 4 years and not MEC the Contract or create a Modified Endowment Contract which you would then lose the tax advantage of the CV Insurance Monies.
So basically the contract is set up so that less then 1% of interest from the Cash Value side will fund the COI or Cost Of Insurance with no further premiums. Yet when you borrowed the money from most well design UL's you can use a Preffered Loan with 0% or 2% rate of interest. Now you pay yourself in loan installments of 6-8% whatever you feel like giving yourself base on your credit rating you give yourself.
Now if the Policy is getting to rich in CV you have to open a second insurance contract and repeat the above!
Basic of basics, basically your using a Arbitrage with your own money.
Posted: Sat Jul 15, 2006 10:18 am Post Subject: I messed up
Okay I messed up! Forgot to sign in and ended up double posting the above post about infinite banking system.
Posted: Sat Jul 15, 2006 11:46 am Post Subject:
Now look at this way, most people can't just buy Pernament Life Insurance because of affordability reasons. So when I suggest this use of Life Ins. I do it in a Step Up Method.
Say a 30-35 year old making around 35 grand a year. His or her Net Life Value of now is 30X his/her income. Obviously he or she can't afford a UL or WL policy of a Million dollars! So I suggest is 100 grand W/L along with Term to complete the million which is usually affordable.
Now I take that 100 grand EIUL/UL/WL whatever and max fund that. Once you fund that fully, payments are no longer needed and the CV easily stands in for ones Emergency Fund plus now your debt will be owned by the individual. If they can do this in 5 years the next step is to either increase the UL or pick up a new policy and start over funding again. The goal is by 20 years one has a fully funded Policy or Policies greater then a million.
This is assuming as one goes the wealth expotentially grows. Yet using insurance is guaranteeing value unlike other investments. I'm not saying other investments shouldn't be done but the use of Insurance products such as W/L and Annuities guarantees one's wealth.
Posted: Tue Jul 18, 2006 10:28 am Post Subject: pls explain, it seems inneresting !
So just as you have said, one needs to increase the UL or get a new policy after those 5 years, how much increase do you prefer if you have initially invested worth 100 grands in UL or WL ?? Again where do I see my investment after 20 years counting the exponential growth that you described ??
Posted: Tue Jul 18, 2006 12:48 pm Post Subject:
Okay, let me say this. You'll create a little less then if you invested in your 401 depending if you even qualify to put that much in a Qualified Plan. Yet though, when you retire and start Harvesting the money, Insurance Contract shines! Why? Because if you use a EIUL you will if you are smart use the Preferred Loans, meaning you can pull the money out in loans without any taxes. Okay up to a certain amount, or what you have place in the contract. Yet some disagree with that and suggest as long as you use the Loan feature no taxes but that isn't quite right. Yet though, the loans go against your DB in a good EIUL not Cash Value. What does that mean? You'll keep you Cash Value high making interest off of that. In fact, what you could create if you keep loan withdrawals down to around the interest being credited to your account/accounts you can keep the withdrawals of money far longer then if you was withdrawing money out of a Qualified Plan or Non Qualified Security funds. Once again, I highly suggest getting with a expierence agent and have him run you the illustrations, then go see a CPA or Lawyer to assure that the illustrations is honest and not loaded up with returns that are higher then the policy can really pay.
Exact amounts of returns and accumulations. I'll have to get back to you shortly on that. Yet though if a 35 yr old in good health, paid premiums of 6800 dollars a year in a good EIUL and uses current illustration method (which would be about 6-7%) at the age of 65 they would have about 750,000 dollars of Cash Value to work with. So using my suggesting of loans and crediting you could pull out 37,500 yearly without touching the 750,000 base of cash value. Yet I would suggest to keep making payments thru out your life. So that would be a income of about 31 grand a year for ever and ever and have a DB when you pass away to boot. Few other tricks I played here, like having a level DB but if something happens you change the DB option to recieve DB plus CV at your Death.
Yet this is the time I have to spend right now. I know I skated all over the board, and probably didn't explain it exactly as I should. So if you have certain questions please fire away!
Posted: Thu Jul 20, 2006 11:44 am Post Subject:
So just as you have said, one needs to increase the UL or get a new policy after those 5 years, how much increase do you prefer if you have initially invested worth 100 grands in UL or WL ?? Again where do I see my investment after 20 years counting the exponential growth that you described ??
Part of the expotential growth will come from the Name Sake, Infinite Banking. In other words after you build up your first one, you'll start extracting loans such as a new car or furniture. Except paying a bank or financial group you will pay yourself with interest.
UL's, have exceptional loan features, depending up what company you pick you'll have a 0 or 2% interest rate on the money you borrow from your account value. Yet be careful, you'll want a contract that has the most favorable treatment to CV while there is a loan outstanding.
Now you pay yourself back 8% and you make 6-8% instead of the bank. Same thing goes for Realstate such as your home. Just borrow the money out of your contract and pay it back just like you do the bank. That is the arbitrage quality of the idea.
Yet if you do it correctly, while you pay yourself back and interest earned and you fully funded as much Cash possible in the Contract, what will happen is the Insurance Company will have to send you the excess money or deposit it in another Contract to avoid a MEC, Modified Endowment Contract. This came by some years ago when Banks and Securities end of the business complained and lobby the Government for relief, it use to be you could place as much money in a Insurance Contract as you desired.
Posted: Thu Jul 20, 2006 11:53 am Post Subject:
Now if anyone is 55 or older, self employed or proprietor you can take advantage of the 412i Plans. You can do the MF/Infinite Banking and your premium will be tax deductible just like your 401 Plan is.
You can use up to 100% of your income plus an extra % depending upon several factors. They generally run for 5 years and available to self proprietors that failed in saving for retirement an has the ability to fund a plan within 5 or so years! So overfunding an Insurance Contract is not alien to everyone, well not least the US Government! You can use Annuities or up to a 50/50 split with Annuities and CV Insurance contract.
Posted: Sat Sep 22, 2007 03:55 pm Post Subject: just read the book on infinite banking
I think that a ul or vul provides more flexibility than the WL used in the book, I am not sure that ny company sells a paid up additions rider anymore like illustrated. It is still a dividend option, but cant buy the rider. I am playing with the numbers on both the WL and VUL to see which is better. The book is worth $20, neat concept to share with savvy clients
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