Thanks for reading 3 Reasons to Implement Infinite Banking Today! Those of you who know me, know I’ve been in the insurance industry for many of the past 9 years. I have fought long and hard to bring awareness and understanding to the Infinite Banking strategy and help my clients unlock their financial potential by saving interest and opportunity costs associated with spending money – simply by knowing how to use this specially designed, dividend paying whole life insurance policy to it’s full potential.
Attempting to turn life insurance from a need product to a want product, I’ve begun explaining how this specific financial strategy works beginning with my own personal values and experiences.
I’ve talked about the financial values of the policy, and I’ve also talked about how it can give you more time for the things you value most in life because of the mental peace, clarity, and stability that it gives to people who have it.
Now I want to uncover the reasons why, if you don’t already have an Infinite Banking policy in place or have begun the Discovery Process but are still holding off for various reasons, it’s important to start implementing your policy today.
The Rising Cost of Insurance
By now you know the financial foundation we use at The Wise Banker to implement an Infinite Banking policy, is a specially designed, dividend paying whole life insurance policy (if you don’t already know this you can catch up here.)
As a millennial, I grew up learning how life insurance had left a bad taste in many people’s mouth. The generation of salespeople prior to me, often got their foot in the door so to speak as door to door salespeople using fear-based reasoning to get people to buy insurance products that often over-promised and under-delivered.
While I don’t agree with these tactics – as a financial advisor, I focus more on the financial stewardship aspects of life insurance — the reasoning they used remains largely true and is worth touching on here today.
Reason # 1, the rising cost of insurance, means that the longer you wait to purchase life insurance, the higher your cost will be. That is why the best time to purchase your life insurance policy is when you’re 18, (or if you’re lucky your parents would have bought a policy for you when you were born), and the second-best time to buy is today.
It’s easy to see when using the example of a term insurance policy which is different than a whole life insurance policy:
If you’re 30 years old buying a $100,000 term 10 policy that expires at age 85, your premiums may be approximately $10 per month. Having renewed the policy every 10 years until expiry, compare the first 10 years of monthly premium from age 30-40 at $10 per month with the last terms premium from age 81-85 at approximately $1,045 per month.
You can see there’s a significant difference in price and that’s because the older you get, the more likely you are to die and insuring the risk simply costs more.
With a whole life insurance policy which is different than a term insurance policy, we see more expensive premiums yes. However, instead of starting off extremely cheap and becoming more expensive every 10 years, these premiums are averaged out and are guaranteed to remain the same price for the entire time you’re paying it.
In our case, if you’re our 30-year-old buying a $100,000 whole life policy that covers you until age 100, and you select paying the premiums for the entire 70 years you’re insured for, your monthly premium will be approximately $168 a month for those 70 years.
From these examples, we can see how life insurance becomes more expensive the older we get, meaning the longer you wait to purchase life insurance, the higher your cost will be.
The key take away here is that insurance is never going to be cheaper than it is today.
Medical Issues and Lifestyle Choices
Let’s say you started looking into purchasing an Infinite Banking policy when you were 30 but waited to purchase your insurance to “do more research” or to “figure things out on your end.”
Time has passed you buy and you’re ready to go ahead with the policy at age 32. In the time it took you to research every financial product out there and come back to this one, your doctors found a tumour. You’re confident the treatments will work, and we go ahead with the application for the policy anyways. After a long period of waiting for treatments to be successful and complete, and with doctor reports written, there are four ways your insurance application will go:
- You will be approved
- You will be rated meaning your premiums will be higher than expected
- You will be approved with an exclusion for this specific scenario
- You will be found uninsurable.
Outcome 2, 3, and 4 are not favourable, though outcome 2 may be the best-case scenario of the three in this instance.
These outcomes don’t just pertain to medical issues either, the same thing decisions can be made about lifestyle activities. Let’s say you’re our 30-year-old who was diagnosed with a tumour that was treated successfully. Coming out of this life changing process, you decide to pick up snowmobiling as a hobby.
During the application process, the insurance company has no problem insuring you based on medical advances, however, because of your new dangerous lifestyle activity, you are found uninsurable and are denied the insurance coverage.
The key take away here is that life happens, and you never know if you’ll be insurable or not in the future. That is why, getting your infinite banking policy in place today is so important.
Every person is unique in their financial situation and we in no way claim that one size fits all. At The Wise Banker, we are committed to providing you with the information you need to fit your life, your family, and/or your business.
The Time Value of Money
The time value of money is a simple and slightly more uplifting reason to purchase insurance today.
The time value of money is the idea that money received today is worth more than money received tomorrow because you have a longer time period to earn interest if you invest the money that’s been received. This is particularly true when considering the time horizon we’re dealing with when using an Infinite Banking policy.
Now keep in mind a specially designed, dividend paying whole life insurance is not an investment, although we do see growth inside the policy in the form of guaranteed cash values.
Because life insurance is inherently cheaper today than it will be tomorrow, we can buy the same value at a better price, or we can buy more value for the same price. When we do so sooner rather than later, the growth potential is far greater than we would see otherwise because of one very special design element, the paid-up additions rider.
The paid-up additions rider is key when setting up an Infinite Banking policy. This allows us to purchase a minimal amount of insurance initially, while purchasing additional fully paid up insurance later.
The reason why we would do that is compounding insurance policies. While our initial insurance policy holds cash values that we can use to finance our purchases during our lifetime with, each subsequent insurance policy also holds its own cash values and can also earn its own dividends that can purchase even more insurance.
The key take away here is that when you get started with an Infinite Banking policy today, you end up with more value in both insurance and cash values than you otherwise would have seen.
While cash values are not in addition to the death benefit, they do contribute to it and will be equal to your total benefit amount at the end of your contract (typically age 100). A good way to understand cash values is to think of them like savings. Because death is a guaranteed event, the insurance company reduces their liability or cost for the death benefit by saving money specifically for it and on our behalf.
Don’t Wait To Get Started
Again, the best time to purchase your life insurance policy is when you’re 18, (or if you’re lucky your parents would have bought a policy for you when you were born), and the second-best time to buy is today.
At The Wise Banker, we are here to educate people how they can use life insurance to finance their life and business and build a wealth that’s designed to last for generations.
My personal hope is that throughout this educational process, you will come to know the same peace, clarity, and stability that I have experienced in my own financial plan and life.
Infinite Banking and whole life insurance are two separate and equally complicated topics to break down and discuss. Right now, my hope in writing these blogs is to build a basic understanding for Infinite Banking and while doing so, offer simple explanations for things and refer mostly to uncomplicated insurance plans. I will touch more on estate planning, corporate owned life insurance, and planned-giving in future blogs – always for education purposes and not intended as financial advice. Thanks for understanding!
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All the best in your financial journey,