Infinite Banking in Canada

[Lalit R.]

I am researching the concept of Inifinite banking and how it can be setup in Canada. There are a few practitioners who can hep setup a High Cash Value Par Whole Life Insurance Policy with Dividends as the main engine. So the question is has anyone done it? Is it worth the effort? What are the pitfalls given limitations due to tax clauses in Canada?

Wont it be better to actually manage the funds yourself and buy a Term insurance instead? The returns are never guaranteed in Canadian Whole Life insurance and so we can decouple the product as Insurance + Forced investment.

Opinions and views are welcome.

Lalit

[Jer Yeung]

infinite banking, at least in the US, is predicated on being able to take loans against your cash value without it being recognized as income, with the entire balance (or remainder of it) accruing dividends.  Are there specific tax clauses that would preclude you from borrowing your own money out of a cash value life insurance policy?  That should be something that any qualified life insurance agent could tell you, as that's not an infinite banking concept - that's just a cash value life insurance concept.

As far as whether it's better to manage the funds yourself and buy term... maybe.  Part of it depends on your timeline, and part of it depends on the rest of your portfolio. I like selling permanent life insurance as an option for a more stable long term return, allowing you to get a little more aggressive in your stock market holdings.  It's also a good way to get some sort long term care or chronic illness coverage.  

the downside to a term is what happens if you need life insurance later, but your term expires and you're not as healthy as you used to be?  then... you pay through the nose.  It's something you should discuss in detail with a life insurance agent - just make sure you ask all the questions up front and aren't just buying what they pitch. If you're going to do it, consider IULs, and make sure you max out the cash value accumulation without running into tax implications (not sure if that's a thing in Canada or not).