10 Most Common Infinite Banking Questions In 10 Minutes

Alright guys, let's dive quickly into the world of infinite banking by answering these 10 frequently asked questions in under 10 minutes!

1. What is Infinite Banking?

   Infinite banking is using an overfunded whole life insurance policy to save money. Your money grows for your entire life and you borrow against your policy instead of going to a bank or paying cash. This allows your money to continue growing even while borrowing, with other benefits from permanent life insurance.

2. Is Infinite Banking a Scam?

   No, it's not a scam but can be overhyped. Infinite banking can be ineffective if the policy isn't designed properly. Beware of any pitch that oversells life insurance as an investment since it can't outperform good investments by nature.

3. Is Infinite Banking Only for the Rich?

   It's not only for the rich, but an initial minimum of $10,000 is recommended to make it worthwhile. Those unable to put this amount initially might find it less beneficial. Focus on making more money to save enough before diving into infinite banking.

4. What Type of Life Insurance is Used for Infinite Banking?

   Whole life insurance is highly recommended for its ideal structure to borrow against and provide steady growth. While Indexed Universal Life (IUL) has some pros, whole life offers more control with less complexity and unpredictability.

5. How Many Infinite Banking Policies Can I Own?

   There's no strict limit but it depends on your insurable life value. You can own multiple policies as long as they stay under your worth economically. Small policies on others such as children or business partners can be used, too.

6. How to Take a Loan from a Life Insurance Policy?

   You borrow against the policy; not from it. The amount you can borrow depends on your cash surrender value. Initially, it's less than what's put in. Later, you can borrow amounts exceeding your contributions.

7. Can I Use a Policy to Pay Off My Mortgage?

   Technically, yes, but it's not recommended as it can lead to loss of liquidity and control. Get a mortgage at low rates instead of using your policy funds for this purpose.

8. Do I Pay Taxes When Borrowing Against Life Insurance?

   No, loans against your policy are not taxed since they aren't considered taxable income. This allows your money to grow and be accessed without tax penalties.

9. What Are the Interest Rates?

   The interest rates within the policies range from around 2.5% to 5%. Borrowing rates vary from mid-threes to high sixes. Using a third-party lender can give you cheaper borrowing rates.

10. How Do I Design This Type of Policy?

    • Work with mutual dividend-paying life insurance companies. There are about 10, but we recommend 5 based on effectiveness.
    • The policy should focus on a low base insurance premium and maximize paid-up additions for cash value growth.
    • Engage a knowledgeable team to ensure proper setup and ongoing support for effectively managing your financial strategy.

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