Is “Becoming Your Own Banker” A Scam?

This question is becoming more and more prevalent today as people begin to realize that just owning or purchasing high cash value life insurance won’t make you any richer. And the answer is, it depends. Let’s take a closer look.

Seems almost on a daily basis that someone calls to boast about how they paid off a mortgage, a car or some other lower interest loan by borrowing from their life insurance policy and transferring their debt to the life insurance company.  Sadly, that loan against their life insurance is going to cost them more money than if they hadn’t transferred that debt at all.

So here’s the problem. Many life insurance agents who have heard about “Becoming Your Own Banker” or the “Infinite Banking Concept” are using poor logic as they turn and use these concepts to sell high cash value life insurance just to earn higher commission. And it baffles the mind how many people buy into it.  So contemplate the following statement very carefully, “How can raising the interest rate on money you have to pay back to somebody else, even the life insurance company, ever be a good thing?” Here’s where things get interesting…

Borrowing from a life insurance policy only makes sense if the rate the insurance company is going to charge you will be lower than what you would have had to pay somebody else to borrow the same amount of money.

And by the way, whenever you borrow money always make sure that you can make more money than what you have to pay back for the loan, and if you can’t…don’t borrow the money.  Making sure you can earn more money than what you have borrowed is called creating free cash flow.  Free cash flow is far more critical to creating wealth than purchasing all the life insurance in the world.  If you have questions about the validity of that statement study Jeff Bezos, the founder of Amazon, and find out why be believes so strongly in free cash flow.

That being said, never ever underestimate the power of owning and leveraging high cash value life insurance.  Here are several good reasons why:

  • You need quick money for a project, emergency or investment that surfaces in your life
  • You need to make a purchase, but don’t want to give up your returns or dividends
  • You want to have more control over the terms of your loan(s)
  • You have sporadic cash flow and need more friendly repayment schedule
  • You want to take advantage of the cash back, points or travel miles on your credit card, but never have to pay interest to the credit card company
  • You want to be able to spend all you make during your lifetime and still leave a legacy
  • You believe that contracts are more dependable than speculations and projections
  • You desire to keep more of what you make
  • You want to leverage money multiple times annually but only pay interest once annually

And the list goes on and on.

But never get caught up in believing that purchasing high cash value life insurance is going to accomplish any of these wonderful things for you if you don’t take the bull by the horns and ascertain the power of the Perpetual Wealth Code™ and how, coupled with owning high cash value life insurance, you can become wealthier than you possibly could be without owning participating whole life insurance.   That is the missing link in many agents’ sales pitch.  They just conveniently overlook the facts to make a sale.  Now you know better and shouldn’t lose any money on rushing out to purchase a 7702 account, IUL or any hyperbole some agent or agents are trying to sell to make higher commissions off you.

The fact is high cash value life insurance is a good thing to own but becomes more valuable if you apply the Perpetual Wealth Code™ in managing it.  This begins with the design of you policy and extends to the use and management of each life insurance policy that you own.  It’s simple, but not easy. That’s why we work with our clients, helping them to better understand the Perpetual Wealth Code™ because once you grasp it owning high cash value life insurance becomes much more logical in your overall financial portfolio.  Without the Perpetual Wealth Code™ owing high cash value life insurance can become just another expensive purchase that keeps you from reaching your financial goals.