Infinite Banking Debate

My only video where I have more downvotes than up. Which doesn’t surprise me in the least because it tackles the “Infinite Banking Concept”. You can see the video here.

The issue is MANY people believe in this concept dearly. And anytime you’re confronting sacred cows you’re bound to have arrows coming your way. So be it.

But over the last few days I’ve had an interesting “debate” of sorts with a guy on this concept. He keeps referring to the 6.4% average increase in cash value with the infinite banking concept. Yet, when I asked the simple question of what my cash value looks like after 10 or 20 yrs, I would not receive anywhere NEAR the 6.4%. More like a shorter term CD growth actually.

And here is ALWAYS my problem with life insurance guys. They have a hard time discerning between “crediting rate” i.e., the 6.4%, and actual rate of increase you get as the owner of the policy.

This would be similar to looking at pre-tax returns vs. post-tax returns. Or Pre investment fee returns vs. post-fee returns.

The former is MEANINGLESS, it’s only the latter that means anything. What I actually get to keep.
An 8% post tax return is MUCH more valuable to me than a 10% pre-tax return where I pay 30% in taxes.

The same thing happens here with life insurance. Crediting rate is BEFORE Cost of Insurance (COI) and other fees are calculated.

So, if YOU are being solicited and your interest is piqued by a high rate of return on your cash value, you really need to see the illustration which shows such cash value increasing to the rate being offered.

If it isn’t, just ask where is my 6.4% rate of return.

Finally, remember, whole life insurance is nothing more than an intermediate bond fund in its payout to you, i.e. your growth in cash value. And that’s the way it has to be for the insurance company to actuarially price the risk. WIth whole life the risk is ALL on the insurance company.

it’s a unilateral contract. You pay your premiums they are OBLIGATED to pay out. Thus they can’t afford to take that risk lightly.

Universal Life is different. The risk is ON YOU. There is NO guarantee. Thus the interest you may receive in Universal life could be higher than that of whole life. Again, investment 101, more risk, more potential return.

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