You may have heard about cash flow banking and its ability to help you finance expenses, give you control over your finances, and create a financial legacy for your family. Similar to the heart of the infinite banking concept, we see many benefits in cash flow banking. Read on to learn what cash flow banking is, the advantages of using this system, and how to set up a life insurance policy to reap the cash value benefits.
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Cash flow banking is leveraging cash value in a whole life insurance policy to self-finance, make purchases, make investments, or to create free cash flow. Cash flow banking can provide you access to capital without having to go through the traditional loan process at a bank. Normally when you take out a loan from the bank or another financial institution, you are required to make payments, which include interest and principal, until the loan is paid back in full. Leveraging money against life insurance cash value is similar to a line of credit because it is interest only. All you are required to pay is the interest. You are never required to pay back the principal.
Cash flow banking gives you options about how you manage your finances. When you have been funding a cash value life insurance policy, you will have access to money that you can borrow on a moment’s notice. The “loan” comes from the insurance company’s general fund and it is fully collateralized by your policy. Because the loan is fully collateralized it gives you lots of flexibility to use the money you’ve borrowed. All you’re required to pay on the loan is the annual loan interest. You have full control as to when and if you make principal repayments. Having a loan out against your policy does not negatively affect the guaranteed growth of the policy.
To build your “personal cash flow bank” you’ll start with a whole life insurance policy. Some people are hesitant to opt for whole life insurance policies because the premiums are typically higher than term insurance. However, term insurance doesn’t allow you to build cash value. Plus, these higher premiums are essential to building cash value. Without significant cash value, you can still have a useful life insurance policy. But you won’t have the added benefits of available cash value or building a significant financial legacy for your family. A whole life insurance policy provides you with a death benefit to cover traditional life insurance needs, as well as the increased cash flow that provides the benefits we just covered.
To start cash flow banking, you’ll need to craft the correct whole life insurance policy. Opting for dividends and a paid-up addition rider are two of the most important insurance features for increasing cash flow. As you pay premiums, you accumulate cash value in your policy that can then be “borrowed” against to fund anything from a house to a college education. Additionally, money from a life insurance policy has tax advantages, which makes whole life insurance a strong policy to start a cash flow bank.
Using a cash flow bank system allows you to increase, use and enjoy your wealth now and create a financial legacy for your family after you die. Cash flow banking, also known as ‘infinite banking,’ is possible because you can use your policy as collateral similar to the way you can use other assets for collateral—like your home. A personal cash flow bank allows you to create a strategy for your finances that has guaranteed growth with little risk. Here at Life Benefits, we teach how to fully utilize a whole life insurance plan to cultivate a legacy for your family that you can use now and for years to come.
If you’re deciding whether or not to adopt this strategy, our ebook, “Understanding the Infinite Banking Concept,” answers all the typical questions you probably have.