A great reason to have whole life insurance in your plan is the banking factor. Whole life insurance policies have a cash value account and a policy loan feature. There are no stipulations regarding the use of a policy’s cash values. You don’t have to qualify to use your own funds. No one will ask what you are using them for. You have full liquidity, use and control of the cash values in your policy. In fact, the policyholder has the first right to the cash values. By taking a policy loan from yourself, you are able to use the funds as you see fit in your personal life and business. Whole life insurance policies do not have self-dealing laws like IRA’s.
When we use these policies for banking purposes we actually promote and endorse self-dealing. Why? By borrowing from yourself and paying yourself back in lieu of borrowing from a traditional bank, we become the banker. We control the terms of the loan. More importantly, instead of paying interest to the bank, we recapture that interest and pay it back to ourselves. The money that flows out to pay your loans is getting paid back to you. It’s like pulling it from your left pocket and placing it in your right. As your policy, or personal bank, grows you can begin to self-finance virtually anything. The opportunities are infinite. Since whole life insurance policies are structured differently than bank loans, the principal is reduced quicker when comparing the same loan terms. A loan that gets paid off quicker means that less payments are made. When less payments are made more money is saved. As the banking cycle is repeated within a whole life insurance policy, the cash values, dividends and death benefit all grow. Therefore, this feature has become the focus of my clients.
Scott Storace
